By Aarthi Swaminathan
“For those who can afford it, conditions have become much more favorable to buyers than last year,” said a housing economist.
Homeowners take longer to sell their homes. And that’s potentially good news for homebuyers, who now have more negotiating room.
Mortgage rates are soaring, with the 30-year fixed rate averaging 7.37% on Thursday, according to Mortgage News Daily
For the average homebuyer, the monthly payment for that mortgage is up 50% from the year before, when mortgage rates were 3%, Redfin said.
The massive rate hike froze buyer demand, with existing home sales falling for the eighth straight month. The last time sales fell for so many consecutive months was in 2007.
So it makes sense that listings for sale aren’t moving as fast as they have during the pandemic.
Listings are currently taking eight days longer to go from sale to pending, compared to last year, Zillow Z said in a report released Wednesday. The longer these homes are on the market, the more “inspiring” it is for sellers to lower prices to attract more buyers, Zillow said.
To that end, 27.5% of listings in September suffered price drops, Zillow added. Before the pandemic, only about 22% of listings had price drops.
“A less stressful experience for homebuyers is a silver lining of today’s market,” Jeff Tucker, senior economist at Zillow, told MarketWatch.
“For those who can afford it, conditions have become much more favorable to buyers than last year. Less competition means home buyers now have more time to consider their options to ensure they find the best fit, less chance of being caught in a bidding war and they might even get a discount off the list price,” he added.
“Homes are taking twice as long to sell as they did in the spring,” says a report from Redfin (RDFN).
Sellers lower their prices to attract buyers, as shown in the table below.
“Homes will eventually sell, but it may take a few months, and sellers need to meet buyers where they are,” said Chen Zhao of Redfin.
“That means lower prices and lower negotiations, including things like giving buyers credit to buy out their mortgage rate and pay for home repairs,” Zhao added.
Homes for sale were on the market for 34 days, a full week longer than the time on the market a year ago, Redfin said. It’s also a big change from May this year, when homes sold in an average of 17 days.
By mid-October, about 8% of homes for sale had a price drop to entice buyers, up from 4% a year ago, Redfin added.
The increase in time on market follows the analyzes of other real estate companies. Realtor.com also said homes spent an entire extra week on the market in October.
“For owners considering selling, this means building in extra time into the process,” the report said. “For buyers, that may mean a bit more time to consider options.”
(Realtor.com is operated by News Corp subsidiary Move Inc. and MarketWatch is a unit of Dow Jones, which is also a News Corp subsidiary.)
Existing homes for sale remained on the market for 19 days in September, slightly longer than the 16 days reported in August, the National Association of Realtors said Thursday.
Buyer anxiety over rates has led home sellers to see their profits shrink, ATTOM report says
Profit margins on sales of median-priced single-family homes and condos in the United States fell 54.6% as home prices fell for the first time in 3 years, according to a company report.
“Rapidly rising mortgage rates not only led to lower home sales, but also began to impact home prices,” said Rick Sharga, executive vice president of market intelligence at ATTOM. , in a press release.
The median price of a home fell about 3% from the second quarter, to about $340,000, the company said.
The biggest drop in profits was seen in cities such as Claremont-Lebanon, NH, San Francisco, Prescott, Arizona and Barnstable, Mass.
And with mortgage rates poised to rise, it’s “very likely that house prices will continue to weaken in many markets over the coming months,” Sharga said.
“If the Federal Reserve’s goal was to slow the housing market, it succeeded spectacularly,” he added.
The other gauge to watch closely is inventory – or in real estate terms, month supply.
This number tells us how many months it would take for the current inventory of homes on the market to sell given the current pace, NAR said.
In September, homes for sale spent approximately 3.2 months on the market, which, while still below the usual four or five months on the market before the pandemic, is still a significant difference from the past two years.
In January 2022, listings for sale passed a record 1.6-month low in the market, according to NAR data.
To be clear, although currently on the rise, housing stock remains weak overall, wrote Ian Shepherdson, chief economist at Pantheon Macroeconomics in a note.
People are sitting on their homes, either because they want to hold onto their record mortgage rate or because they’re worried they won’t be able to sell for the price they want. Sellers are “on strike”, as one real estate blogger put it.
About 86% of people with mortgages have rates below 5% and 24% below 3%, according to current residential mortgage data from the Federal Housing Finance Authority. The data is as of June 30, 2022.
New listings for sale fell 15% in September from a year ago, Realtor.com estimates. Redfin estimates that listings fell 22% in September from the previous month and 25% from a year ago. Zillow said registrations in September fell 16% from a year ago.
And the fewer announcements there are, the harder it will be for prices to come down.
But for the market to fully rebalance, prices need to fall “substantially,” Shepherdson said. He expects home prices to drop 15-20% over the next year.
Do you have ideas on the housing market? Write to MarketWatch reporter Aarthi Swaminathan at firstname.lastname@example.org
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