The high mortgage rate environment has prevented many homeowners from selling their homes, and the trend has only deepened this year. From January through April, there were 46% fewer sellers than the average before COVID.
The swift, unprecedented rise in long-term mortgage rates in 2022 prevented homeowners from selling. They climbed from 3.25% in January to 4% in February, 5% in April, 6% in June, and eclipsed 7% in October. By year’s end, they settled at 6.5%. Many homeowners were locked into incredibly low fixed mortgage rates.
Based on the first four months of 2023, it is projected that there will be 18,100 missing sellers. Many homeowners would like to move but aren’t for practical reasons. Their home may not be exactly what they desire, but they love their current loan. This change will likely occur when mortgage rates drop to 5.5% or lower.
SELLERS
The active inventory finally increased in the past couple of weeks.
The active listing inventory increased by 23 homes in the past two weeks. It is the lowest level to start May since tracking began in 2004. Typically, the inventory starts rising in January or February at the latest. This year it fell through mid-April, shedding 454 homes since the start of the year, down 19%. Buyers in the marketplace are competing for crumbs. Any new homes to hit the market will be bid on swiftly and thrown right into pending status, as long as sellers do not overprice. Expect the inventory to grow slowly from here until it peaks sometime over the summer between July and August.
WHY ARE WE IN BIDDING WARS AND OFFERS OVER THE LIST PRICE?
It’s true that the housing market has cooled down—tremendously. However, adorable, turnkey homes in desirable locations are still receiving multiple offers and often selling for a premium.
Opposite things can be true at the same time.
The run-up in mortgage interest rates thinned out the ranks of buyers. But the higher rates also scared off many would-be home sellers, many of whom are buyers as well. Every time a move-in ready home with curb appeal in a good school district goes up for sale, buyers pounce. Those homes are selling briskly with plenty of competition.
What’s not selling nearly as well: homes that need some work, are in less popular locations, or are overpriced. Buyers either can’t afford or aren’t willing to pay extra to upgrade these properties.
So you need to have a strategy in place if they want to be competitive.
- KNOW YOUR LOCAL MARKET
Forget about what’s happening in the national housing market. Focus on what’s going on locally.
- GET PRE-APPROVED FOR A MORTGAGE
Get pre-approved for a mortgage. When you find that perfect home, you will not lose it because you aren’t able to secure a loan. This critical step will also help you home in on the price range that you can comfortably afford.
- MAKE A LARGER DOWN PAYMENT
Sellers don’t want deals to fall apart or for their homes to languish on the market. When those things happen, other buyers often assume there is something wrong with the home. Sellers look more favorably on buyers who can kick in larger down payments. Many sellers and their agents erroneously believe these buyers are more financially stable. They may even sometimes accept a lower offer with a higher down payment.
- OFFER COMPELLING TERMS
Bidding wars aren’t won on price alone. Terms also matter. As a real estate agent I craft offers that will get a response. I will advise you on the terms as the market dictates.
Finally, you might want to widen your search radius. Sometimes, buyers are able to find larger, new homes at a lower price if they are willing to move farther away from the bigger cities. However, the trade-off might be a longer commute.
If you have housing questions that you would like answered, email me at preeti(at)eliteochomes(dotted)com
Source: Realtor.com
