As the housing market barrels toward the end of the year and all of its holiday trimmings, potential homebuyers are likely wondering what’s in store for the coming season.
Home shoppers looking for lower asking prices can officially check that off their wish list. November’s median home list price of $416,000 was much more wallet-friendly than June’s record high of $449,000, according to a recent report from Realtor.com®.
Yet the volatile real estate landscape is not quite ready to bring only glad tidings. High mortgage rates—which, as of Wednesday, hover at 6.58% for a 30-year fixed-rate loan—are a stark reminder that many buyers might still struggle on the affordability front.
“Even though prices are down month to month, they’re still up by double digits from a year ago,” says Danielle Hale, chief economist of Realtor.com. “And with mortgage rates also up, buying a home is more expensive than last year.”
This deadly combo of high home prices and interest rates adds up to the fact that median mortgage payments are now about $900 higher each month than they were just one year earlier.
So, while all is not merry and bright in the world of real estate, there are inroads for intrepid buyers.
Inventory is soaring, but is that good news?
After the COVID-19 pandemic-fueled homebuying rush reduced the number of homes for sale to all-time lows, the inventory of housing has since rebounded. There were 46.8% more homes for sale in November compared with the same month in 2021.
That translates to a whopping 240,000 more homes for sale on any given day in November. Yet that massive increase in listings hides an important caveat: Fresh listings are down 17.2% on a year-over-year basis.
Put simply, many potential home sellers have decided to stay put rather than list. Many are locked into mortgages with extremely low rates that they’re reluctant to give up, and cash-strapped buyers simply aren’t making offers like they did even just a few months ago.
The result? Homes are simply sitting—and sitting—on the market, ballooning the total number of homes for sale.
“We’ll see fewer newly listed homes hitting the market now through the end of the year and possibly into early next year,” predicts Hale.
Watch: Realtor.com® Housing Market Update, Thanksgiving 2022 Edition
Real estate markets in the West have slowed down
Some areas in the United States are taking the brunt of the market downturn.
“Sales activity in the West has slowed more dramatically as the region’s high home prices are a daunting foe for buyers also contending with higher mortgage rates,” says Hale.
Case in point: Phoenix saw its inventory grow by 176% on a year-over-year basis. And while the average time a typical property spent on the market reached 56 days in November (up eight days compared with last year), homes in Pheonix lingered two additional days.
“Demand is low,” says Brandy Aguirre, a real estate agent at Home Key Realty in the metro Phoenix area. “From August 2021 to April 2022, the active listing count was stable with few changes. But in April, that quickly changed when interest rates started increasing.”
Can seller concessions balance out rate hikes?
Sellers might not think it’s the best time to list homes, but could it be a good time for home shoppers to buy?
More homes for sale and fewer buyers are helping to empower the few home shoppers out there, who can now hold out for a bargain. And sellers are caving: About 19.6% of all homes for sale were forced to reduce their asking prices to attract buyers in November. And while there likely won’t be an end-of-year buying bonanza, a few intrepid buyers might just score some deals.
“What does all this mean if you are looking to buy a home?” asks Aguirre. “That you’ll have all the leverage for negotiating with sellers. More sellers are willing to pay a portion of the buyer’s closing costs or pay money toward buying down their interest rate. Sellers are dropping prices an average of 3% off the list price—that’s $15,000 on a $500,000 home.”
And in addition to straight-out cash savings, Aguirre finds sellers are willing to make repairs and accept offers contingent on buyers selling their current home. And perhaps most importantly, sellers “no longer ask the buyer to make risky moves such as waiving the appraisal contingency.” (A contingency is simply anything a buyer or seller must do before closing the deal.)
So despite climbing mortgage rates, not all home shoppers need to sit on the sidelines wondering why they didn’t snag a home when rates were low. Instead, they should use their negotiating position with potential sellers.
“If you didn’t buy last year, you can’t go back in time and buy,” advises Hale. “You need to consider what’s possible now.”
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