Traditionally, spring is the busiest time for home sellers and buyers, and it’s an indication of the strength of the market.
Economists and housing experts are watching closely this year to see how buyers and sellers behave in the coming months.
“Both sides are in the market kind of cautious,” said Keith Chennault, owner of Chennault Real Estate, based in West Philadelphia.
And there’s good reason for that. The market is facing a lot of uncertainty over where the economy is going with a key inflation measure surging and speculation over when and how hard a recession could hit.
As of Thursday, the average 30-year fixed rate was 6.65%, a three-month high, according to the government-backed mortgage buyer Freddie Mac. That’s down from a high of 7.08% in the fall but up from a low of 6.09% a month ago.
Compared with recent years, there are a lot fewer buyers and homes for sale, so the real estate industry is expecting fewer sales this year.
The strength of this spring market will depend on how many sellers jump in. Economists are watching numbers of new listings to see when — or if — they come back. Across the Mid-Atlantic, sellers usually get out ahead of buyers, putting their homes on the market in the first few months of the year in anticipation of more activity in the spring.
The number of home showings in the Philadelphia region has ticked up and so has the number of new listings of homes, according to the multiple listing service Bright MLS. But sellers are reluctant, and buyers have entered the market slightly ahead of them, said Lisa Sturtevant, chief economist at Bright MLS.
“I think it’s going to be a bumpy spring,” she said.
Sturtevant and other experts shared some tips for navigating this market.
The market isn’t as frenzied as it was the last couple of years, but that doesn’t mean buyers can take their time when they find a property they like. Because there aren’t many homes for sale, buyers need to be ready to jump on one.
Buyers also should be prepared to hold on to a home once they’ve purchased — at least five years should be enough time to factor in any short-term dips in home values. Because of general economic uncertainty, Daryl Fairweather, chief economist for the online real estate brokerage Redfin said.
“People should look at buying a home as a long-term decision,” she said.
For the last couple of years, homeowners have heard about sellers getting 10 or more offers on homes, buyers waiving inspections, and homes selling for top dollar.
“This is not 2021 or the beginning of 2022. You’re not gonna get outrageous prices for your house. That time is past,” Chennault said. “I tell sellers all the time, ‘Understand the market that we’re in.'”
That means sellers should price their homes by looking at comparable sales within the last three months, not six, he said.
Although buyers faced with fewer homes on the market may be more open to a fixer-upper, homeowners can’t just put property of any condition on the market and expect it to sell.
Annette Collier, broker of record at West Philadelphia-based Able Real Estate, said that recently, she and clients have walked into homes for sale and been shocked by how filthy they were, with belongings lying everywhere. It’s been happening more often, she said.
“Because of the need for inventory, there are some sellers that think they can sell a property to somebody that’s less than the condition of a dog living in it,” said Collier.
Over the last few years, sellers have had a massive upper hand in the market and sat back as buyers flocked to them with checkbooks waving. But now, both sides have to work to get deals done.
Sellers are more willing to make repairs that buyers request and to contribute money at closing.
And depending on factors such as a home’s location and how long it’s been on the market, buyers can offer below listing price — the opposite of the last few years.
Low mortgage rates obviously were great for buyers, but record-low levels in 2020 and 2021 also showed how competitive they make the market. This spring, buyers won’t face as much competition.
Meanwhile, lenders are competing over fewer prospective home buyers, which can benefit the ones who remain. Chennault said he’s noticed that banks and other institutions are offering more money for first-time home buyers.
“I’m learning more and more about different down payment assistance programs it seems like every week,” he said.
With rising prices, first-time home buyers especially have been waiting for some kind of market crash that would allow them to snap up a home for cheap.
But “there’s just no evidence we’re going to see any kind of major price correction in our market,” Sturtevant said.
Hopeful home buyers lurking on the sidelines also have been waiting for mortgage rates to go down significantly, but they’ll be waiting for a long time.
Home buyers can refinance later to get a lower mortgage rate, but the new rate depends on credit scores and home equity, and the costs to refinance can be significant. And if homeowners received funds from a down payment program, strings attached to the money may require them to repay when they refinance.
The bottom line is for buyers to purchase because it’s the right decision for them and their families.
“The decision on whether to buy a home now is so personal,” Sturtevant said.
Because of the limited supply of existing homes for sale, Collier said buyers should be open to putting an offer on a property that needs some work. That’s especially true if the fixer-upper is in a neighborhood where the buyer wants to live but can’t otherwise afford.
“A lot of times, you’re walking right into immediate equity,” she said.
Renovation loans can help homeowners pay for the fixes.
Nationwide last month, 57% of builders offered some kind of incentive to buyers, from paying closing costs to buying down mortgage rates, according to the National Association of Home Builders. A little less than one-third of builders reduced home prices and did so by an average of 6%. Incentives have shrunk since December but not by much.
This article is written by Michaelle Bond from The Philadelphia Inquirer and was legally licensed via the Tribune Content Agency through the Industry Dive Content Marketplace. Please direct all licensing questions to firstname.lastname@example.org.