As the pandemic morphs and changes, the economy and real estate markets are reinventing themselves as well.
“We’ve had a kind of reset in housing,” says Daryl Fairweather, chief economist for Redfin (redfin.com), the national real estate company.
After COVID-19 hit hard in early 2020, this major transformation allowed millions of Americans to work from home. Such remote work let many employees pick and choose their lifestyles.
“As long as they have strong and reliable internet and a willing employer, folks can live in a charming historic town, near a beach or on a mountaintop,” says Mark Nash, a real estate analyst and author of “1001 Tips for Buying and Selling a Home.”
With these new liberties, the pandemic pushed up home prices in small to midsized communities, as well as outlying suburbs.
“Commuting distances from major employment centers have become less determinative in setting home prices,” according to Nash, a longtime real estate broker.
“Now home prices are at a new equilibrium,” says Fairweather, who believes this leveling is largely complete, at least for the immediate future.
“There’s really no reason to see a lot more home price appreciation,” she says.
The slowing pace of home price gains is especially good news for prospective first-time buyers. But while buyers are now gaining slightly more bargaining power, sellers continue to have great sway.
Here are a few pointers for current buyers:
-- Realize that delaying your purchase could cost you many dollars.
Mortgage rates are still hovering near historically low levels. But will that continue in coming years? Michael Crowley, who heads an independent realty firm in Spokane, Washington, says buyers should remember that rental rates are rising in many areas, and there’s no guarantee that mortgage rates will stay low.
“Rental remains a viable option for those whose plans are unsettled. But for many with stable work situations, ownership is a better option than renting. Whenever feasible, it’s usually wise to build equity by paying your own mortgage, rather than helping a landlord pay the mortgage on the building he owns,” Crowley says.
-- Consider bidding on a “stale” property.
During much of the pandemic period, home sellers have reigned supreme. But at this point in the housing cycle, setting too lofty a list price can hurt owners who attempt to “test the market” -- resulting in their listings languishing unsold for a lengthy time.
“A stale listing can represent a huge opportunity for buyers -- assuming they swoop in at the right time when the owner is really motivated and will negotiate,” says Tom Early, a past president of the National Association of Exclusive Buyer Agents (naeba.org).
“Ninety percent of the time when a house goes stale, the reason is that the place was overpriced in the beginning because the sellers were greedy. Then by the time the owners slash their price, most buyers have lost interest,” Early says.
-- Don’t rule out a “spec home” from a builder.
Early, who’s sold homes since 1982, says he’s helped many purchasers score a good deal on a brand-new property that the builders constructed without specific buyers in mind. These are known as “spec” properties.
Though many such homes have already been snatched up by eager buyers, Early says there are still more available for those who hunt them down.
“Seek out builders who still have several ‘spec’ houses in their developments. They need to sell these homes to pay off the bank for their construction loans. Their urgency could result in a good deal for you,” Early says.
-- Recognize that bargains are still tough to find.
Through strategic planning, a 36-year-old investment analyst snagged a better-than-average markdown on a colonial house near his new workplace in an Omaha neighborhood favored by many young purchasers. Because of the popularity of this area, many there must still pay at least list price to avoid losing out in a competitive bidding situation.
Early says there’s no shame in offering list price or slightly more in such a hot area, assuming you’ve done your homework and are convinced you’re not paying more than a few thousand dollars over true market value.
“You can’t let emotion cloud your judgment. But if you’ve found a house you dearly love, years from now you won’t regret that you ran that extra mile to make it your own,” Early says.
-- Don’t fret if your home search lasts into the winter holidays.
Early says that during vacation and holiday periods, many “test-the-market” sellers -- including those free from pressure to move -- take down their “For Sale” signs. Most who are left are highly motivated to cut a deal.
But how do you know which sellers have a strong need to move soon? Early says many owners, along with their listing agents, are remarkably frank about their motivation to move.
“It’s amazing just how candid many people are about their reasons for needing to sell. They’ll tell you if they’ve had serious financial problems or major health issues or if they’re going through a marital breakup, even if that weakens their bargaining position,” Early says. (To contact Ellen James Martin, email her at firstname.lastname@example.org.)