Should home sellers expect to enjoy pandemic-era pricing? Not in today’s housing market. Current conditions differ greatly from a few years ago, when home prices were at record highs and mortgage rates were at an all-time low. Now that mortgage rates are climbing and sellers outnumber buyers, industry experts say owners need to temper expectations.
Seeking Concessions in Today’s Housing Market
Interest rates are rocketing faster than a celebrity shilling a memecoin. US Treasury bond yields are at their highest levels since the global financial crisis, which is also impacting the mortgage market. The average fixed rate on a 30-year mortgage is around 7%. As long as the war in Iran persists, borrowing costs will remain elevated.
Higher home prices and a modest uptick in listings are creating an environment where prospective homebuyers are more cautious and take their time before making the largest purchase of their lives. As a result, sellers might not receive the same prices as others did in the housing market of 2021, 2022, or even 2023, industry experts say.
Brett Rubin, vice president at Bowers Group, told Fox News Digital:
"Fewer buyers equals fewer opportunities to sell the home, less competitive environment. And so as a result, we're seeing a lot of sellers struggling to sell their homes in a market that otherwise would be a pretty strong market.
"And with that, we're starting to see homes sitting on the market a little bit longer, a lot more price reductions, hesitant buyers kind of sitting on their sidelines. And so this rate hike definitely has implications on both sides of the spectrum."
Both private sellers and homebuilders are seeing the writing on the wall.
In a Sept. 18 report, Redfin found that sellers gave concessions to buyers in about 45% of US home sales recorded in August, the highest share for that month since 2020. Additionally, a recent Realtor.com analysis determined that about 15% of new-construction listings offered a reduced interest rate to prospective homebuyers last month.
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So, what does this include exactly? For the most part, these concessions help bolster buyers' purchasing power, from lower closing costs to below-market mortgage rates. With sellers outnumbering buyers nationwide by 58% in August, owners looking to offload their residential properties may have few alternatives.
At the same time, this makes market watchers wonder whether these concessions are preventing home prices from coming down. If John Smith is willing to replace kitchen appliances or cover attorney fees in exchange for the exact asking price, then others are likely willing to do the same.
After years of sitting on the sidelines, buyers are taking advantage of the situation and seeking "every concession under the sun," says Amanda Peterson, a Redfin Premier agent in Dallas. "I had clients walk away from a home they loved because the pantry was too small and they didn’t like the laundry room—even after the sellers offered to alter the floor plan. There are so many homes for sale that buyers are holding out for one that checks every box," Peterson said.
New home prices surprisingly jumped in August, climbing 0.4% to above $393,000. So, if buyers cannot persuade sellers to lower their prices, Tom, Dick, and Harry will instead take a new water heater, dishwasher, and toilet.
Best of Both Worlds
Should home prices be lower? Conditions are too mixed to determine one way or the other. Inventory is limited, but there are more sellers than buyers. Mortgage rates are back in the 7% range, but homebuilders are offering sub-4% to stimulate demand. Ultimately, both sides of the deal get the best of both worlds, something the administration discussed earlier this year: Owners maintain their equity gains, and families have a greater opportunity to achieve the American Dream of homeownership.
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