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This Autumn Might Be the Best Time to Sell and Buy a Home

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With the summer of 2022 officially over, homeowners and prospective homeowners may feel it is too late to sell or buy a house.  However, as mentioned in a recent article published by Realtor.com, “…the good news for buyers is that fall is typically the best time to buy a home—and this autumn is shaping up to be better than usual with a bumper crop of homes on the market with a longer shelf life than they’ve had in the past.”  Instead of the real estate market being defined specifically as a “buyers’ market” or “sellers’ market”, experts believe that both sides of the real estate transaction will be in great positioning.

The price of homes continues to rise and homeowners recognize that they have significant equity in their home, at these prices, and realize this is a great time to cash in.  However, the price increases are slowing a bit, offering some relief to those looking to buy home.   Additionally, prospective home buyers are seeing more homes for sale and more time on the market, reducing the frantic rush to put an offer in on a home before multiple offers are received.

Mortgage rates have continued to increase, up to 5.89% as of the beginning of September.  The higher prices coupled with rising rates is causing some would-be home buyers to attempt some negotiations and request concessions, despite the appearances of it being still a sellers’ market.  And, sellers seem to understand that they can still walk away with significant gains.  Simply stated, the article concludes, “In other words, buyers are driving a harder bargain than they could have during the raging sellers’ market of the past. And thanks to those high home prices, sellers who give a little still stand to gain a lot, creating that rare, beautiful possibility of a win-win scenario for all.” 

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Will Home Prices Drop with the Rise in Rates?

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The 2021 real estate market was defined by low supply, low mortgage rate and high demand.  These factors set home values soaring month after month.  Now that the spring market of 2022 is in full swing, the news of rising mortgages rates leaves real estate buyers, sellers and professionals wondering how home prices may be impacted.

In an article published by MarketWatch.com, industry experts were asked just this question.  The predictions varied slightly, but a common theme emerged.  According to the reporter, Alisa Wolfson, one expert believes that the continued shortage in the supply of homes will be a factor in the continued rise in home prices.  Another opinion, with regards to rising mortgage rates, indicates that almost 30% of purchases are cash transactions, so rates don’t affect these buyers, so demand will continue to be high.  Further, experts believe that, even buyers that need to secure a mortgage have a sense of urgency to purchase a home.  These buyers may readjust their budget based on the increased rates, but will continue to search for and purchase homes.

It would appear that many experts agree, the data and trends support the belief that the real estate market will continue to see high demand and, therefore, rising home prices. The rise may cool off a bit but its highly unlikely prices will see drastic decreases.

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Good News on Horizon for First Time Home Buyers?

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For the past several months, the news about the U.S. Housing market has repeated a very similar message month after month- high demand and low supply is driving up home prices.  In fact, the average annual home appreciation rate was recorded at 19.2% in January 2022, a record high increase.

In an article published by Fortune.com, it is stated that the number of mortgage applications recently decreased a bit, most likely in response to an increase in mortgage rates. Nevertheless, it isn’t anticipated that this will result in a significant decrease in demand for houses.  Reporter, Will Daniel, states, “After all, in March, active home listings in the U.S. were down roughly 18.6% compared to a year ago. And the U.S housing market is facing a shortage of nearly 6 million new single-family homes.”  It will take a bit more time for the housing market to balance out.

However, home buyers should remain optimistic.  Realtor.com surveyed prospective home sellers and reported that 64% of these home owners anticipate listing their home for sale within the 2022 calendar year.  The survey also might give the first time home buyers, who have largely been priced out of the market, a glimmer of hope. More than half of the homeowners who indicated they would be listing their home plan to list below $500,000, which some may consider “relatively affordable”. 

Those waiting for new construction homes may have to continue to be patient.  “We’re at the lowest level of inventory on record back at least 23 years,“ according to Redfin’s deputy chief economist Taylor Marr. “So housing starts are not quite making that large of a dent in terms of the inventory shortage just yet.”

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Photo Credit: Tierra Mallorca

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Home Values Expected to Outpace Original Forecasts

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As 2022 neared, real estate professionals began to forecast the housing market for the spring of 2022.  Many experts predicted that the drastic increase to home values that Americans saw during the height of the pandemic, would begin to slow down significantly.

Nevertheless, as March 2022 approaches, some real estate experts are adjusting their predictions.  In an article published on Nasdaq.com, Marc Rapport reports that, for example, the Zillow economists adjusted their initial prediction of a 11% increase in home values for 2022 to a predicted 16.4% increase.  The report prepared by Zillow explained, “The robust long-term outlook is driven by our expectations for tight market conditions to persist, with demand for housing exceeding the supply of available homes.”

Yet, some economists don’t see that type of growth happening again this year.  Lawrence Yun, the National Association of Realtors chief economist, predicts growth around 3-5% for 2022, continuing through 2023. “The good news is that home prices should begin to normalize later in 2022 as more homes come on the market,” Yun said in Rapport’s article.

Of course factors such as inflation, home price increase and mortgage rates affect affordability of home for many Americans.  Even as home prices level out, these other economic factors will surely impact what the future holds for the real estate market.    Read the entire article.

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Why Are Buyer’s Agents Earning Less on Home Sales?

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It has been a seller’s market in the U.S. real estate market for the past several months. Many consumers realize the low mortgage rates, coupled with low housing inventory have driven up home prices.  Buyers have been met with bidding wars and have purchased homes over asking price.  However, in some situations, the buyer’s agent isn’t getting as big of a cut, in the form of commission, as they have historically.

According to an article published in MarketWatch.com, “The average commission rate for these agents was 2.63% of the sales price of a home as of the three-month period ending Nov. 30, down from 2.69% a year earlier.”  In fact, it’s the lowest rate since Redfin began tracking the data in 2017.  The buyer’s agents are seeing smaller commission rates because, sellers, who determine and ultimately pay the commission rate to both agents, are offering anywhere from 2-2.5% commission to buyer’s agents instead of the historical 3%.  Simply put, the homes are in such demand sellers don’t have to offer larger commissions to the buyer’s agent.

Coincidentally, real estate buyer’s agents’ commission rate has been the subject of some class action law suits.  It has been argued that the “set-up is unfair to consumers” and could eventually result in buyers having to pay their own agent’s commission instead of it being the responsibility of the seller. This is a topic to continue to watch because it, coupled with eventual decline in home prices, could result in an overall reduction in the dollars in agents’ pockets.

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Slow Down in Home Price Gains Reported

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U.S. home prices have consistently risen each month in comparison to the prices in 2020.  As many Americans are aware, the onset of the pandemic created a high demand for homes and with the short supply and low rates, prices increased significantly.

However, a recent report indicates the price increases may be slowing down.  CNBC.com reports in an article written by Diana Olick, “Home prices rose 19.5% in September year over year, down from a 19.8% annual gain in August, according to the S&P CoreLogic Case-Shiller National Home Price Index. That is the first decrease in the annual gain since May 2020.”

Some cities continue to see significant increases in pricing compared to September 2020.  For example, Phoenix home prices grew just over 33% compared to September 2020.  Even some of the cities in America that reported the smallest gains still have increases of more than 10%.

The managing director at S&P Dow Jones Indices, Craig Lazzara, may have coined the most accurate description of this data:  “Deceleration”.  Prices are still strong, it just appears the growth is slowing down a bit.  The combination of an anticipated increase of homes coming on the market with mortgage rates slightly increasing are potential factors.

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Home Sales Fall for First Time in 14 Months

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The real estate market in the U.S. has been a red hot sellers’ market for several months, reflected in homes in short supply and high demand, and consistent price increases.  In comparison to August 2020, the median price of an existing home increased almost 15% by August of this year.

However, it appears that the demand for homes may be on the decline.  From July 2021 to August 2021, sales of homes dipped 2%.  In an article published by CNBC.com, it is stated, ‘“The housing sector is clearly settling down,” said Lawrence Yun, chief economist for the Realtors, who called last year’s super surge “an anomaly.’

It would seem that some buyers are deciding to wait for prices to fall or adjust, especially first time home buyers that might be priced out of the market right now.  According to the article, first time home buyers usually make up about 40% of the total buyers, but the percentage has fallen to 29%.

Additionally, it is expected that more housing inventory is on the horizon with the eviction moratorium ending.  Since the inventory of homes had been down 13% in comparison to August 2020, the additionally supply may help ease the supply issue and cause prices to adjust.

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What’s Next for the U.S. Real Estate Market?

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The last several months, real estate in the United States has been red hot.  Low supply of homes, mortgage rates that continue to remain low and a large number of Americans making post-pandemic decisions to move to bigger homes or homes in different geographic areas have all held pave the way for a hot sellers’ market.  However, many know that this is not the first time the real estate market exploded into situations of multiple offers, above asking price, with real estate professionals just trying to keep up.  So, it should be no surprise to many seasoned real estate professionals, that there will be a change in the market at some point.

In an article published by Forbes, a theory about the real estate market phases is detailed.  Real Estate expert Glenn R. Mueller, PhD believes the four phases of the real estate market are Recovery, Expansion, Hyper Supply and Recession.  And, according to Sam Mehrbod PhD, author of the Forbes article, U.S. real estate markets are currently in phase two.  This phase is still a sellers’ market, but heading toward the peak.  On the horizon, potentially, is the third phase.  This phase is a buyers’ market defined as Hyper Supply and buyers become a little more scarce and panic selling can begin.

Mehrbod has suggestions for real estate professionals to help them prepare for the next phase, building a net work to ensure success in any phase of the real estate market.  Its imperative for real estate professionals to continue to build and stay relevant within their networks.  He makes suggestions such as regularly posting relevant and educational content on social media, beginning to build buyer lead lists for future markets, and utilizing marketing funds consistently to allow long term marketing plans. By staying on top of networking and marketing and anticipating what might be coming up next, real estate professionals can be prepared to ride the next wave.

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How Zillow Plans to Make Selling Homes Simpler

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Many Americans interested in, not only the potential value of their home, but also other homes in their neighborhood, the homes of their friends or homes they dream to own someday, search Zillow.com to see the estimated value the site has calculated.  Zillow.com, however, is looking to branch out beyond just providing home price estimates, they have begun to actually buy and sell homes and plan on making the process even easier. 

In an article published by CNN Business, the new division of Zillow, called Zillow Offers has some new features to make the process of selling a home possible with just a few clicks of a mouse. As CNN Business reporter, Clare Duffy, details, “For certain homes, Zillow’s ‘Zestimate’— the online estimate of the home’s value — will now represent an initial cash offer from the company to buy the property. That could mean an even quicker timeline for homeowners looking to close a sale without going through the hassle of a formal listing, or a source of helpful data for would-be sellers who want to know how much money they’ll have to buy their next house.”

The Zillow Offers division of the company has been operating in a handful of markets for about three years now.  They have been requesting information from homeowners in order to determine the cash offer from Zillow.  The new, revamped process, soon to be available in 23 markets, will skip the required questionnaire and photos from the homeowner.  Zillow is confident in the information currently available for many of the homes that the posted Zestimate would be the actual cash offer.  A homeowner could simply contact Zillow to cash in on the Zestimate.  After an inspection and adjustment made based on any repair issues, the sellers could pay a Zillow the seller’s fee and close the deal.

Skeptics doubt the accuracy of the posted home values.  Yet, according to the article, Zillow’s COO Jeremy Wacksman points out, “For homeowners who decline Zillow’s cash offer, the difference between Zillow’s offer and what they end up selling for is typically less than 1%…”

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The 2021 Housing Market Continues to Look Good for Sellers

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A look back at the first few weeks of 2021 and the national real estate market shows that home sales and the number of buyers increased in comparison to the last few weeks of 2020.  Nevertheless, a low inventory of homes continues to create difficulty buying conditions for these would-be homeowners.

In an article published by CNBC.com, reported by Diana Olick, the housing market is compared to the beginning of 2020 where January 2021 is reported to have seen sales 23.7% higher than January of last year.  According to the article, ‘“Home sales are continuing to play a part in propping up the economy,” said Lawrence Yun, chief economist for the NAR. “With additional stimulus likely to pass and several vaccines now available, the housing outlook looks solid for this year.”’

However, the availability of homes, in comparison to January 2020, was down 26%.  This reported 1.9-month supply, compared to a January 2020 3- month supply, is the lowest ever reported. Of course, the low housing inventory coupled with the continued demand has allowed the median home price to increase a little over 14% since last January.

The article goes on to report new home sales and how builders have benefited from the shortages but also face supply and labor issues.  Read the entire article.

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