How to Deal with Today’s Less Competitive—but Still Pricey—Housing Market
October 4, 2022
After years of on-fire conditions, the housing market is now in an unprecedented state. According to a report from Zillow, prices are high and slowly yet steadily stabilizing, and competition is falling. Compared to the record prices fueled by intense competition of the last couple years, it’s worth paying attention to this shift. Buying and selling a home is a monumental step for many people, and the process can feel intimidating when you look at the big picture—even without these challenging (and sometimes confusing) market conditions.
Here’s a breakdown of what you need to know about navigating the market right now to get the best deal on your dream home or make a successful sale.
1. Weigh supply and demand.
The market is on track to become more balanced—but there’s still a high demand and low supply. We’re currently in uncharted territory when it comes to the housing market, an uncertainty that goes back to the Great Recession of 2008, when the building industry was negatively impacted, says Chris Masiello, CEO and president of BHG Real Estate the Masiello Group. In the last 10 to 14 years, there’s been a 40% reduction in home building. At the same time, the demographics of homeowners have expanded to include millennials looking to buy their first home and baby boomers who want to “age in place.”
“Those two factors—diminishing inventory with expanding demographics—really has kind of created the situation that we have today,” Masiello says. “Interest rates going up has certainly cooled the market down a little bit. The market itself is kind of catching its breath.”
Basically, the appreciation rate was rising at an unsustainable rate (over two years of 20% annual appreciation), so home values are now expected to come down over time—but the market is still very hot.
2. Remember that it's still a seller's market.
Sellers continue to sell their homes at high prices for substantial returns on their home-buying investment, especially if they bought their home before the pandemic. Home values are up 16% compared to a year ago and 44% more than they were pre-COVID—but they have fallen month over month, says Amanda Pendleton, Zillow’s home trends expert. Because there are fewer homes out there and more buyers, sellers are able to set a strong price. The market is rebalancing, though, so if you’re planning to sell in the coming months, be sure to set your expectations accordingly: You might not get the sky-high sale price you thought you might even a few months ago.
3. If you're selling, start preparing as early as possible.
According to Zillow research, one of the top regrets sellers have is not giving themselves enough time to prepare their home—for example, taking on projects that increase its value, like adding a fresh coat of paint and landscaping. “In today's market, you can't just put out a for sale sign and expect that the offers are gonna start rolling in,” Pendleton says. “It doesn't work that way. You have to roll up your sleeves and do a little bit of work to [prepare] your home for sale.”
4. If you're buying, you have a little extra time to make a decision - but don't wait too long.
High prices and mortgage rates have led to fewer buyers being able to afford a move—but those who can are still out there. Homes are flying off the market (if priced right, the average time they’re for sale is 10 days). While that’s not as rapid-fire as it was during the pandemic, it’s still pretty quick: To put it in perspective, in 2019, houses would take about three weeks to go from listed to pending. Today’s lower competition also comes with a slightly higher buyer’s premium, Masiello says.
“Sellers are still in the driver's seat in this market, but as a buyer, you're going to have more options,” Pendleton says. “You're going to have less competition; you're going to have more time to consider your decision, and that's a good thing for a buyer.” In other words, you’re less likely to get into a bidding war.
That said, while 19% of homes have cut their prices, according to Pendleton, that doesn't mean you can sit on the sidelines waiting for a dramatically better price. “As we start returning to a healthier housing market, we're not going to see home values or home prices significantly fall,” Pendleton says.
5. Connect with local agents.
A local agent will know and understand what’s going on in your city or neighborhood better than anyone, which gives you a competitive edge. “They're going to be able to tell you, ‘Hey, you might be able to offer a little bit less than the asking price on this home,’ or ‘We think this home was actually really competitively priced, and you may be in a bidding war,’” Pendleton says. Get referrals from friends and family, read online reviews, and do a couple interviews to make sure your real estate agent is the right fit.
If you’re buying, focus on your needs versus wants and tell your agent about them, Masiello says. “I think being realistic about that [is important] because once you get the property, if it’s got good bones, then you can put your signature on it,” he says.
6. Set a reasonable price.
You need to make sure your home is priced right if you’re selling—otherwise, it’ll hang out on the market for a while. Ask your agent what the right premium is and have them help you with the pricing.
“The longer an overpriced listing is on the market, the less it's worth,” Masiello says. “If the house is in good condition, it's in a good location, and you've priced it reasonably—if there is a premium in the market to be had, you'll naturally get it through the multiple-offer process.”
7. Use technology to your advantage.
One thing COVID-19 gave us was better technology for buying or selling a home. Take advantage of that: Explore or set up a home tour, click through an interactive floor plan, and find a great local agent, all from the comfort of your (current) home. If you're selling, consider taking professional photos of your house, too, to help your home shine on visually oriented listing sites.
Pendleton believes these technological advancements are a step in the right direction. “It's more information, more power to the people,” she says. “The more information you have at your fingertips, the more you're able to make informed decisions about what's really the biggest financial investment of your life.”
8. Time it right.
Ultimately, the best time to buy or sell is whenever you feel like it’s the right move (no pun intended). Now is as good a time as any to make the home buying (or selling) leap, as long as you’re financially and emotionally ready.
“I think it really gets down to what's your personal situation,” Masiello says. “If you are wanting to make a move because your family is expanding, or you need to downsize, I wouldn't see any reason why this would not be a good environment to do that.”
Source: How to Deal with Today’s Less Competitive—but Still Pricey—Housing Market Better Homes and Gardens (September 21, 2022) Bryce Jones