Seller Market is Officially Over! How Some Sellers Are Winning Against Interest Rates
For Buyers: Welcome to a balanced market*, how quickly the tables have turned! While seller markets are ideal for the not-so-perfect home, balanced markets are ideal for the not-so-perfect buyer. This means that buyers who have been recently rejected due to lower down payments, non-conventional financing, or need for closing cost assistance will find sellers are now willing to work with them in this new environment. Supply across all price points is up, with 53% of active listings added by new home developers and investors. Builders especially are dropping prices and offering unique buyer incentives to compete. Experts don’t know how long this period will last as it depends on what interest rates do over the next few months, but home buying just became fun again.
For Sellers: The proverbial “Dump Your Junk” season is over, that loving phrase the industry uses when demand is significantly higher than supply and even the smelliest dilapidated property gets multiple offers over asking price. That is no longer the case as of this writing. Get ready for longer marketing times, multiple price reductions, Realtor® tours, price opinions, staging, repairs, seller-paid closing costs and price negotiations. The extreme seller market is over. It’s no surprise that the market has been shifting since February, with the primary influence being large mortgage rate increases. However, over the past 6 weeks mortgage rates have been particularly volatile, fluctuating from 5.1% to 5.8% within 3 weeks only to drop to 5.3% over the next 2 weeks, and then back up to 5.8% a week later. History tells us that buyers do not like sharp, rapid fluctuations in mortgage rates. It causes buying activity to freeze until a level of stability and certainty can be achieved. This market is no different, contract activity has dropped 28% in the last 6 weeks. The number of listings under contract at this time of year should be around 10,000, putting today’s count of 8,680 well below normal. In the meantime, a 220% increase in supply over the past 15 weeks has put pressure on sellers to compete. With cash buyers offering significantly below list price recently, attention is back on traditional buyers, many of whom have been priced out of the market due to affordability. Price reductions have gone up 500% since March, but have done little to increase demand as mortgage rate increases offset their effect and continue to keep payments high. But not all is lost! Cue the interest rate buy-down, a seller concession tool that has been collecting dust, unneeded, for well over a decade. The reason price reductions have had little effect on affordability is a $10,000 price reduction only saves a buyer $53 on their mortgage payment at 5.8%. However, for a similar cost a seller can buy down a buyer’s mortgage rate and save them $100’s on their monthly mortgage payment, either permanently or temporarily depending on the plan; thus putting their property at a higher competitive advantage than just a straight up price reduction.
Price reduction vs. rate buy-down options:
How We Can Help Get Your Home Sold for Top Dollar: In addition to assist you with pricing your home appropriately and marketing your home using various marketing channels...we will also assist you with preparing your home so it presents well when you hit the market through free home staging. This is especially important in a buyer's market when your home is empty and/or dated. In order to gain an edge in today’s real estate market, a property must be priced right and look better than the competition, which can be done through home staging and high-quality photos. When talking about staging a home, we are referring to a method of decorating that uses design and conceptualization techniques to help potential buyers walk in and envision the property as their own. Staging not only showcases a home’s best assets, but gives buyers a sense of the actual layout of the home, room sizes, and how rooms can be used. Staging creates a space that makes buyers connect emotionally and helps homes sell quickly for the highest possible price. Through years of experience working with buyers and sellers, we quickly recognized the importance of staging. However; we knew most clients couldn’t afford to spend thousands of dollars to have their home professionally staged. As a result, we decided to provide FREE Staging and Editing Services for our clients...which has equated to more money in our sellers’ pockets at closing. We have purchased furniture and accessories that we use to stage our clients’ homes for FREE. We have helped numerous clients sell their homes quicker and for a higher price than comparable properties. If you are thinking of selling...wewould love to help you LIST...STAGE AN SELL your house!
Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report ©2022 Cromford Associates LLC and Tamboer Consulting LLC