The Federal Reserve's interest rate hikes and higher mortgage rates have precipitated a housing market rebalancing, a recent report said.
HomeLight's Top Agent Insights report for the fall, which polled 1,005 real estate agents between July 25 and Aug. 14, said that higher mortgage costs have driven some buyers out of the market. This means that people who can afford houses at the current borrowing rates are benefiting from a more balanced housing market that's defined by increased housing supply and less buyer demand, which has also helped to cool down home prices, the report said.
While it's not quite a buyer's market, the number of realtors who described their current local market as a seller's market dropped to 51%, down from 95% just three months before the poll was conducted.
"The fact that many homes are no longer selling overnight with multiple over [asking] price offers has many sellers nervous about the direction of the market, resulting in price reductions," Christopher Terry, a HomeLight real estate agent, said. "Buyers are seeing this occur and now figure waiting may save them money, so the urgency to make a quick decision is softening.
"This is causing inventory to build as sellers move quickly to try to catch what remains of the seller market," Terry continued.
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Signs that balance is returning
This fall, sellers can expect to see fewer competitive offers that are above asking price, waived contingencies and all cash offers, the report said. Instead, 90% of real estate agents said price reductions have become more common. This is compared to 34% who said the same thing earlier this year in the second quarter.
Most real estate agents said they expected the market to return to a pre-pandemic normal, and 55% of agents expected to see the most significant home price decreases in markets that heated up quickly during the pandemic, the report said. This included Austin, Texas, Boise, Idaho and Phoenix, Ariz.
"Homes are sitting on the market longer, there are more price reductions, and buyers are now asking for concessions to help cover closing costs or interest rate buydowns," Andrea Castaneda, a HomeLight real estate agent, said.
The supply and demand shift means that homes today must be in optimal condition or have unique amenities to attract buyers, Castaneda added.
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Is a buyer’s market on the horizon?
Based on housing trends, the market may be shifting in favor of buyers, according to real estate fintech company, Knock.
Housing inventory is rising at a time when home sales are taking longer to execute, Knock said in its latest real estate forecast. At the same time, the median sales price dropped from its peak in May and June of this year. This dynamic suggests that a buyer's market is emerging, the forecast said.
"With the national market projected to equally favor sellers and buyers by June of next year, prospective property investors and home buyers may see the most favorable national market in recent years," Knock stated in the report. "As more markets slowly shift toward favoring buyers, median sales prices are expected to continue to decline, but only to a point."
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