The hot housing market is one of the most notable outcomes of the pandemic. Housing supply was already low before Covid-19, but lockdowns, record-low mortgage rates, and the desire for more space sent excited buyers into the market in droves.
Although the median home price rose by almost 20% in August 2021 compared to 2019, the market has finally started to show signs of slowing down. So how can you persuade your weary and reluctant buyers to jump back into home searching? Here are a few reasons why you (and they!) shouldn’t wait.
Industry leaders don’t see a 2008-style housing crash on our horizon. Instead, they’re expecting a gradual return to normal. While this won’t happen overnight, there are finally signs that it’s starting. While homes were still selling more than two weeks faster in August compared to last year, 432,000 newly listed homes hit the market. This is a 4.3% year-over-year growth, according to data from realtor.com. An increase in inventory is a good sign for buyers in a competitive — and tight — housing market. These newly listed homes may be smaller in size, but are more affordable as sellers price more competitively.
Many buyers who have been turned away by rising prices will also be happy to know that seasonality has been coming back to the market. Seasonal patterns have largely been absent throughout the past year, but a return of seasonality is a good indication that things may be going back to normal.
Families are starting to get back into the school routine, meaning less time for vacations and house hunting. Buyers and sellers usually don’t want to move their families during the middle of the school year, and would rather wait until the end when they have more time. The busiest moving times are usually during the summer, as 60% of people choose to move between May and August.
Additionally, people are less likely to uproot during the holiday season between November and January. The holiday season can be hectic, and people don’t want to add moving on top of an already stressful time of the year. So if your clients are looking to get into a new home they’ll experience less competition and a calmer experience.
According to Fannie Mae’s Home Purchase Sentiment Index, only 32% of respondents believe it’s a good time to buy a home; however, this is still the highest number since March.
Losing out on bidding wars and sky-high prices are wearing out would-be buyers, causing some to give up and put their house hunt on hold. This means savvy buyers—like yours—can snag a deal while others are taking a pause.
Georgia Agent, Janet Abbazia deals with this problem a lot with her clients: She knows that many buyers are reluctant to jump in because they're hearing that prices have gone up and they may be priced out. She tells them that "interest rates have never been lower so that will help offset higher prices. This market is expected to last potentially for the next 24-36 months, so a house that may be listed for $300k may sell for over asking at $330k or more and become the comp. That means the next house may sell at $350 and higher so by waiting you will end up spending $50k+ for the same house. This market requires buyers to be bold and to have an agent that is ready with bold ideas!"
The August national median listing price for active listings was $380,000, up 8.6% compared to last year and 19.6% compared to 2019, according to data from realtor.com. Large metropolitan areas also have seen a small price gain. So homes are still pricey, but an increased rate of price reductions (now 17.3%) are approaching normal levels. This could indicate that sellers are adjusting their prices to match their competition.
The median national home price for active listings declined slightly from $385,000 in July and August was also the fourth consecutive month that the annual growth rate decreased. It was also the first month since July 2020 when the annual growth rate dropped below double-digits. So we’re seeing prices start to ease.
Mortgage rates continue to hover near rock bottom, and buyers looking for a reasonable rate would be wise to take advantage while they still can.
Experts are split on their mortgage rate predictions for the remainder of 2021, with some expecting the average 30-year rates to stay below 3% through Q4 2021 while other agencies are predicting 30-year rates to reach as high as 3.3% to 3.4% by the end of the year. However, dramatic spikes aren’t expected anytime soon. Several factors could cause mortgage rates to increase, including an improved economy, inflation, and demand.
The single biggest factor keeping mortgage rates so low is the Federal Reserve purchasing $40 billion per month in mortgage-backed securities as part of its Covid stimulus program. However, when the financial system is ready, the Fed will start to raise interest rates by tapering its bond purchasing. So now is the time to get access to the record lows.
Since the onset of the pandemic, the housing market has been anything but normal. It’s difficult to accurately predict what will happen going forward, but waiting it out has risks for your buyers.
Even though the market is starting to cool, there’s still increased competition from more buyers in the market. While getting a home is difficult, it’s not impossible. Your buyers need to make a competitive offer, and in this market, cash is king.
Ribbon is here to empower agents and their clients to win in today’s market. Sellers are still getting multiple offers, sometimes above the listing price, which is why a cash offer is so necessary. Ribbon can help turn your client’s offer into all cash and waive contingencies so they can compete in this market. Once the offer is accepted, they can move into their new home right away and secure financing later.