From CNBC – The beginning of spring this year marked the return of the buyer’s market, as roughly 12% of real estate listings saw their asking prices drop as March turned to April. According to Redfin, this marks a 9% increase in year-over-year metrics.Get a Home Loan Quote
New listings also jumped, seeing an increase of 8% over last spring, according to Realtor Dot Com. This after nearly a month in year-over-year declines in new listings. So what does it all mean? Well, more listings, and less buyers, equals more choices and less competition. A.k.a. a buyer’s bonanza!
Despite the recent uptick in mortgage rates, with Mortgage News Daily reporting rates over 5%, buyers are suddenly optimistic. This is due to a cooling market, which results in less bidding wars, seller desperation, and ultimately, a sharp decline in real estate prices.
Buyers Stop Sweating Just as Sellers Get Thirsty
It’s happening all over the country: real estate companies are seeing the first break in the fever for home buyers. With more listings arising, sellers are dropping their asking prices at a pace we haven’t seen in years.
With that 8% increase in new listings we’ve all just experienced, buyers are suddenly seeing more options than they have since pre-pandemic times. Despite active inventory being down 13% from where it was last year, the pace at which it’s beginning to snowball suggests we may actually surpass last year’s summer inventory numbers.
And despite prices still being higher than they were last year, we’re starting to see a significant drop, which is a fantastic sign for buyers everywhere. But it’s not all peaches and sunshine. With inflation bloating the economy, and rates on the rise, many home buyers are having to tighten their belts, so to speak. The drop in housing prices will be a welcome sight.
Less Competition Is Coming
One way or another, the market is going to continue to cool, which is a major win for those looking to purchase a primary residence, vacation home, or an income producing rental property. Sellers are having to adjust to this new reality as supply grows and demand diminishes. It’s Economics 101.
Sellers are currently dropping their asking prices at a rate which is growing faster and faster as every week goes by. As Redfin’s chief economist, Daryl Fairweather, put it: “Price drops are still rare, but the fact that they are becoming more frequent is one clear sign that the housing market is cooling. It goes to show that there’s a limit to sellers’ power. There is still way more demand than supply, and buyers are still sweating, but sellers can no longer overprice their home and still expect buyers to clamor at their door.”
Rising rates cannot be ignored, however, and buyers need to be well aware of the situation at hand. The average 30-year fixed rate mortgage surpassed 5% this month according to a report from Mortgage News Daily. The good news? For buyers with great credit, options with rates between 3-4% are still available.
Fannie Mae’s Pessimism Is Actually Cautious Optimism
It’s all about consumer confidence, which, with the current inflation crisis, is not at its best right now if we’re being real about it. A recent Fannie Mae survey concluded that home buyers across the board are concerned about rising rates.
As Fannie Mae’s Vice President and Deputy Chief Economist, Mark Palim, recently said:“If consumer pessimism toward home buying conditions continues, and the recent mortgage rate increases are sustained, then we expect to see an even greater cooling of the housing market than previously forecast.”
Again, this is actually a major WIN for buyers, who will ultimately benefit from less competition as real estate asking prices drop by the thousands, even tens of thousands, or more. Our advice? Shop around for rates from multiple lenders, compare numbers side-by-side, and see just how much house you can comfortably afford before hitting the panic button. You might very well be pleasantly surprised by the results.Get a Home Loan Quote