Homesellers Need to Realign Expectations
Rumblings of a housing slowdown are growing as higher mortgage rates and double-digit annual home price gains deal a blow to buyers’ budgets. Housing analysts are warning home sellers that they may need to readjust their expectations, but many are still holding on to hope for a big resale profit, after seeing their neighbors sell in mere hours in a bidding war for well over the listing price. This story is adapted from an article by Melissa Dittman Tracy that appeared in a recent edition of the Realtor Magazine
In the spring, nearly 6,000 homes nationwide sold for $100,000 or more above asking price, according to Redfin data.
“Sellers could do no wrong over the past two years and have become overconfident,” says James McGrath, a real estate broker. “They could take the price their neighbor just got, bump it up 5 percent and still have a line out the door. But with the surge in mortgage rates, those days are over.”
Some homesellers are now having to reduce their price 5 percent below nearby comps to sell quickly, McGrath said.
Economists are quick to note that overall home prices are not likely to fall precipitously, particularly in California. In fact, the national median home price reached an all-time high of $447,000 in June, according to realtor.com. An increase in listings for larger homes may be skewing that figure even higher, economists note.
Housing inventory is slowly increasing, giving homebuyers more selections in many markets and homesellers extra competition. Meanwhile, buyers are showing greater concern about affordability.
Even when the housing market begins to soften, sellers tend to hold on to the original price they had in mind. “Only after sitting on the market for a few months do they acknowledge their expectations may need to come down,” McGrath said. “Realistic sellers will get ahead of their neighbors with realistic prices to sell first.”
Realtors may need to have more upfront conversations with sellers about the list price so a later price reduction isn’t necessary.
Agents may have to do a better job in the current market of educating their sellers. Homeowners can’t just sell for double what they paid for it anymore.
Still, some sellers may insist on a certain price against their agent’s advice,
It’s still a sellers’ market, particularly in California, but buyers are regaining leverage
risking having their home linger on the market.
The pricing will greatly depend on how motivated the seller is, especially here in California where the market has weakened, but is still tilted toward sellers.
Some sellers may want to throw out a price to see what happens, but that’s different than a person who is relocating or someone who needs to sell quickly.
Homeowners looking to sell fast need to carefully review competitive prices in the current market with their Realtor and be prepared when it may not exactly match up with their expectations.
Higher mortgage rates are shrinking the buyer pool, says Lawrence
Yun, chief economist for the National Association of Realtors. The 30-year fixed-rate mortgage jumped from 2.96 percent one year ago to 5.81 percent as of the week ending June 23, according to Freddie Mac.
On a $300,000 mortgage, the average monthly payment has increased from $1,265 last December to about $1,800 at today’s rate, Yun says.
Consumer confidence drives real estate activity, and with inflation at a 40-year high, stock market uncertainty and higher mortgage rates, more buyers are getting priced out.
Certainly, it’s still a seller’s market, but the buyer is starting to have more control and negotiating ability than they did six or 12 months ago. There are more examples of people not buying as frantically — like “sight unseen”offers or waiving the appraisal or home inspection. Those practices are beginning to stall, which heralds a return to a more normalized market with a more logical buying process.