Do not expect house prices to fall significantly any time soon. A sharp drop is unlikely, say the folks at the online real-estate site Zillow.
They say that the belief that house prices are about to crash is the greatest misreading of the market that exists right now among would-be buyers.Read More »
That prediction comes at a time when expectations that prices will drop has reached a new high, specially among homeowners, according to the latest Home Purchase Sentiment Index from Fannie Mae. The index of consumer confidence in housing is standing at its lowest levels since the index was launched in 2011.
House sales are expected to slow even more in coming months as consumers become more pessimistic about conditions for house selling as well as buying, says Doug Duncan, chief economist at Fannie Mae. More people expect mortgage rates to rise than those who anticipate them coming down, the Fannie Mae index found.
Disconnect between sellers and buyers
The lack of confidence in housing comes at a time when most buyers and sellers are misreading the market, which is rebalancing, according to Zillow.
Here is a closer look at each group, what real-estate agents think works in today’s market, and what buyers and sellers are said to be misunderstanding.
Many buyers appear to have stepped out of the market and moved to the sidelines.
So much so that eight in every 10 potential home buyers who responded to the Fannie Mae index say now is a bad time to buy a house with only 16% saying that now is a good time to buy a home.
Potential buyers who are sitting on the sidelines might, however, be missing out, suggests Michael Perry, a real-estate agent who is the head of The Perry Group in Salt Lake City, Utah. He believes that more opportunity in the market is still available now than he has seen over the last five years, particularly for those who view buying a house as a long-term investment.
Should mortgage rates turn down once more or should house prices show a significant fall, those buyers who are now sitting on the sidelines will rush back into the market. That will quickly drive up prices—and competition.
By buying a home now you have some power when it comes to bargaining, Perry argues. You also have more time to find the best house for your needs and more options as you shop for a house. Should buyers come back into the market in force you might be rushed into a purchase that you might regret.
Find financing first
Real-estate agents suggest that would-be first-time buyers take advantage of the time available in today’s slower market by obtaining financing before shopping for a house. They also should be willing to compromise before setting out to shop for a home. It is important that buyers separate their needs from their wants.
Those who are buying now appear to be taking advantage of the more favorable market. Buyers are taking more time to weigh up a home, say three out of five real-estate agents. They also are offering prices more often that are below list price.
Many sellers, according to real-estate agents, are still expecting to receive offers above asking prices. They are expecting bidding wars, a number of offers, and rapid sales. They believe they have no reason to cut their prices.
These expectations are reflected in the Fannie Mae index. Half of the respondents believe that now is a great time to sell a house.
These sellers are likely to have their hopes dashed, however. Those days have gone, at least for now, real-estate agents say.
No longer can sellers place a for-sale sign outside their house and wait for the offers to pour in, says Koby Sway, who is an agent with The Bailey Team in Omaha, Nebraska. They need to undertake home improvements and implement necessary repairs before they list their houses for sale.
Set the right prices
Also, it is more necessary than before that they set the right prices when they are competing with other sellers. After all, the pool of buyers is becoming smaller, Sway explains.
The most significant strategy for sellers right now is to price their homes correctly, Sway adds. Those listings that are competitive are taking 19 days across the country to go under contract—10 days quicker than was the case before the pandemic. Those who are sticking to their prices are finding that their homes are sitting on the market for a median 54 days.
More than a quarter of sellers are being compelled to cut their listing prices. That figure is running at the highest level in four years.