Do these circumstances sound familiar? Limited inventory, low interest rates, appreciating home prices, bidding wars, buying sight unseen – and even waiving inspections.
That’s basically the last three years of the U.S. housing market in a nutshell. But in recent news, and according to the August RE/MAX National Housing Report, sales prices are starting to decelerate, offers are coming in lower, and the number of days a home is on the market is slowly increasing. This could be related to the recent rise in interest rates, which have brought a slight bump in inventory, too. RE/MAX President and CEO Nick Bailey says the change could be a good thing – even for sellers. “The decrease in Median Sales Price and stabilization of home prices is great news for buyers who have been patiently waiting on the sidelines the past few years,” he shares. “And the change in conditions should ultimately be favorable to sellers as well, as buyers re-engage with renewed enthusiasm.” For home sellers worried they missed their opportunity, take a deep breath and relax. Real estate professionals explain why they think this is what is called a normalizing – or calming – of the market. Like yoga after a HIIT class. Understanding the market correction Maria Holland, an agent with RE/MAX Homes & Estate in Nashville, Tennessee, helps calm the nerves of anxious sellers. “The problem is, people haven’t seen a normal market in so long, they’ve forgotten what it looks like,” Holland says.
The low interest rates that buyers became accustomed to over the past few years were historically low and allowed them to afford more. This aided in the increase of home prices. As the Fed has increased interest rates in recent months (which in turn has influenced mortgage rates), however, home prices have begun to decelerate. But as Holland points out, the prices aren’t plummeting. “The percentage of appreciation has gone up at such a great rate, it had to stop,” Holland says. “There’s always a ceiling and a floor…Prices are going to stay up, but they’re not going to keep going up.” She believes the market can’t sustain such a level of appreciation and is modestly correcting itself. Holland also emphasizes she thinks sellers are still in a prime market to sell, especially if their homes are priced accordingly and staged to sell. Buyers, she says, are entering a more navigable market compared to last spring. The spring 2022 market saw such a frenzy of competition that many buyers went to extreme measures – like forgoing inspections or purchasing sight unseen – in hopes of locking down a home. Now, she says this shift is merely evening things out for both sides of the transaction and that buyers and sellers will both have a little more time to process. Tamra Wade, Broker/Owner of RE/MAX TRU in Atlanta, Georgia, agrees that the market is simply stabilizing to a normal housing market. “We [got used to] great interest rates and having more buyers than available homes. It wasn't sustainable,” Wade says. “There are a lot of reasons why it’s a good time to buy right now, especially if you are renting,” Wade explains. “Rents are expected to rise sharply in the next 12 months. If you are considering selling, the time is now, too. The competition will grow, so try to sell your home while there is not a ton of competition.” She believes that, as inventory levels continue to rise, the market may see bidding wars diminish, sales could be closer to or at market price, and buyers will likely start to ask for seller-paid closing costs, concession and repairs. Take advantage of still-good timing Holland and Wade are aligned that the biggest takeaway for sellers entering the market this fall is to focus on the house. There will likely be less “selling a home as-is in a single day” scenarios, meaning home sellers will want to re-engage with the process of preparing a home to sell, including staging, curb appeal and more. “I always say that a home is like a first date. You get one chance to make a good first impression when someone walks in the door. So, prepare your home,” Holland advises. “You might have to declutter, you might have to paint, you might have to stage, and you're going to have to spend some time with a good photographer and do some advertising – and possibly have an open house.” Michael Barry, an agent with RE/MAX Select in Green Valley, Arizona, suggests there is always an exception to the rule and, in certain markets, sellers may continue to have the advantage. He works primarily in a Tucson suburb and exclusive retirement community, and says his niche market has not yet experienced the quick correction that other parts of the state have. According to Barry, retirement communities see a constant turnover. And while the last couple of years put a dent in inventory, he says a major market shift has been slow to come. “Four years ago, [Green Valley] had about 200 properties on the market at any given time. Now, we have only maybe 90. So, with about a 50% cut in inventory, prices have risen just like other areas across the country. We’re just starting to see some price reductions, as well as an increase in days on market,” Barry shares. With rising rent prices, Wade explains that she is seeing a mindset shift among current renters looking to become homeowners. “They’re looking at it like, ‘I can pay this to rent or I can pay this to own,’” she says. Specifically, first-time homebuyers are seeking out starter homes – a turnover that can be beneficial for homeowners motivated to upsize or downsize. Holland suggests home sellers work with a real estate agent who will communicate the current market changes and help set realistic expectations for the process when it comes to sales price and days on market. The moral of the story from the RE/MAX pros? The housing market is still in a good place – prices are decelerating but not plummeting, and sales are still strong. Recommended For You
Written by KERI HENKE