For homebuyers, conditions aren’t ideal, but they’ll take what they can get — and they should.
The U.S. residential real estate market is showing signs of accommodation, if not low prices for frustrated U.S. homebuyers.
That’s the takeaway from a new Zillow (ZG) – Get Zillow Group Inc. Report report showing home prices have declined for the first time since 2012. According to the Zillow Home Value Index, the price of a typical home fell by 0.1%, or an average of $366, in July 2022.
The typical U.S. home price now stands at $357,000, Zillow reported.
“The housing market is ultimately correcting for extreme pressure during the pandemic,” the report stated. “However, challenges to new supply and strong long-run housing demand driven by massive younger generations aging into first-time home buying suggests that, as the slowdown continues to progress, enough buyers are ready to move forward.”
Reasons for Optimism
While the Zillow index is good news for homebuyers, seeing the real estate market balance out was inevitable, housing experts say. Now, normalcy has a chance to set in for buyers who can start taking the long view.
“Assuming you can afford one, almost anytime can be a good time to buy a house,” said Jacob Channel, senior economist at Lending Tree. “It’s virtually impossible to time the market – even for the most seasoned buyers – and, as a result, if your plan is to wait and wait for prices to come down, then you could end up missing out on a lot of great opportunities.”
Make no mistake, those opportunities are finally starting to materialize for homebuyers, with these “buy now” factors in play.
Sellers looking to negotiate. While prices are starting to cool in some areas, they still remain high across much of the country.
“As a result, would-be buyers shouldn’t expect to find many homes on the market that are drastically cheaper than they were a month or two ago,” Channel said. “With that said, even if homes are still being listed and sold for quite a bit of money sellers are more willing to negotiate than they were last year, which could make the homebuying process easier for buyers.”
Buyer fatigue leaves room for new buyers. The boom years (for homeowners) of 2020-21 left sellers gasping for air — and heading to the sidelines. New buyers can start filling the gap.
“We are seeing buyers have more success in the current market,” said Jennifer Beeston, senior vice president of mortgage lending at Guaranteed Rate Mortgage. “The days of 30-plus buyer offers are over in the bulk of the country.”
Many Americans who were excited to buy in 2021 have now left the market due to higher interest rates and fatigue from the multiple offer situations of 2021, Beeston said.
“We’re also starting to see sellers become more realistic in what they expect,” she added. “This shift towards a balanced market is good for buyers.”
Time is on the buyer’s side. The next 60 days will be a great time to purchase a home, said Carol Horton, chief marketing officer at Texas-based Kindred Homes.
“While interest rates are rising, many people and home builders are discounting houses to offset the increase in monthly payments that higher rates bring,” Horton said.
For example, Kindred Homes is offering $15,000 towards mortgage costs. “This can effectively lock a rate for a buyer with good credit at around 4.75%,” Horton noted.
Time for Newbie Homebuyers to Get Into the Game
After years on the sideline, new homebuyers have a window of opportunity to land their first mortgage — but they need to be prepared.
“There are three factors that first-time home buyers should consider first before buying,” Horton said. “If you’re currently renting and your lease is about to expire, have money for a decent down payment (10% or more), and plan to stay in a location for more than three years, as it’s time to start your buying journey.”
If you can check the box on all three issues, start with a housing affordability tool to see your buying power.
“You don’t always need to start with a lender first,” Horton said. “Google has an estimator tool a buyer can use to get an idea of what a monthly payment would cost. Just google ‘mortgage calculator’ to find it.”
