Home is longer on the market: what should homebuyers and sellers know?
If you're a buyer, it's time to prepare for a purchase! Those who planned to get a new home have received this opportunity at much friendly conditions!"
When the market is active and a buyer to seller ratio is approximately the same, the average time homes spend in the listings is from 30 to 45 days. However, now the conditions have changed significantly since it takes more time for a home to be offered for sale. How does it influence the market participants and why has it happened? Let's find out below.
When a home isn't sold fast, it's beneficial for homebuyers first of all. It allows them to have more space for price negotiation. But why does it happen? One of the reasons for that is growing mortgage rates. Now buyers have to pay half more than a year ago when the rate was only 3%, but at the moment it has reached 7.37%! It has stopped some buyers and decreased the number of sales greatly by the rate of 2007. Naturally, homes that have already found their place in the listings have to slow down the pace of selling as it was previously at the time of the pandemic.
The current speed of sales has increased by 8 days from the time when a listing is created to the pending period. This data is provided by Zillow, the most popular marketplace, so it reflects the real data! It means that buyers don't hurry to make deals, so sellers should look for approaches on how to make their estates more attractive, one of which is a price drop. If you analyze the statistics, over 27% of listings had a price reduction in September while this drop was only 22% during the pandemic time.
Currently, buyers are more likely to make reasonably priced purchases.
This lack of competition resulted in the increase of time shoppers can think about their purchase and decide if it's a good fit. It also prevents bidding competition and allows getting a discount. Around 8% of homes get a price drop every week which is twice more than in previous years. Experts say that every home will be sold, but not all sellers are ready to wait for several months. It leads to such things as:
- Lower prices;
- Negotiations;
- Giving buyers credits to buy down a mortgage rate;
- Pay for home repairs.
If you compare the time homes are sold in the market, it was 17 days in May and 34 last year, but now it's much longer. At least one extra week according to Realtor.com.
What should homeowners keep in mind because of that? Well, they should make thorough planning since they'll need to wait longer and spend more resources to finally get a deal. Moreover, ATTOM's report says that sellers experience significant profit shrinkage because of the delays. It even has influenced the median price of homes across the country since it's the first drop in home prices for the last 3 years and rising mortgage rates. The last ones have decreased the number of real estate purchases as well as reflected in prices too.
The median home price has lost 3% in comparison with the second quarter, and it is around $340k at the moment. The most impressive discounts are mainly in such cities as San Francisco, Mass, Claremont-Lebanon, Prescott, Barnstable, and others. Moreover, since mortgage rates aren't going to slow down or eliminate, it will lead to more price weakening in the future as well.
One more thing to track in the real estate market is inventory or the so-called month supply. We could see the lack of housing in spring due to low mortgage rates and other factors. However, this data is also important to clarify how long homes can spend in the market with the following pace of sales. September has shown that this approximate period is 3.2 months which is a little shorter than it was during the pandemic time. But it is also more than twice longer if you compare this time period with the previous year! For example, January 2022 had a record low index of 1.6 months NAR reports!
Real estate experts admit that the percentage of inventory available in the market at the moment is gradually rising, but it is still not enough to achieve a balance between sellers and buyers. People don't hurry to add their homes to the listings trying to pay out a low mortgage rate they manage to get or being afraid to get enough money they planned to receive.
If you compare mortgage rates possessed by people 24% of holders have a rate under 3% and 86% have a rate below 5%, so who's gonna opt for a devastating 7% and more? No wonder that it led to a drop in the number of homes in the listings which is 15% lower than in the previous year and 22% lower in comparison with the previous month. And there is a golden rule in the real estate business: the fewer listings there are in the market, the more challenging it is to restore adequate prices on them!
One more important thing to keep in mind is the following: only a substantial decrease in real estate prices may cause market to rebalance, so experts suppose that the price drop will reach from 15% to 20% in the upcoming year!
