Right after the pandemic hit, a married couple in their 30s began searching for their dream property: a semi-suburban house in turnkey condition on a three-plus acre plot where they could start a nursery business and raise vegetables. Their timing couldn’t have been worse.
“Trying to fulfill our housing vision during the pandemic was pure torture, with all those high-speed bidding wars. We lost all those battles, despite our strenuous efforts,” says the husband.
But the couple, an architect married to a nurse, have persisted in their quest. A month ago, they discovered the perfect property: a contemporary house in a bucolic five-acre setting. Though the place is priced slightly above their range, they have reason for hope, as no other bidders have emerged in more than two months. What’s more, the owners are about to relist at a lower price.
“As our agent tells us, this property has become a ‘stale listing’ because it was overpriced when it first came on the market and now carries a stigma. So, our strategy is to wait for the right moment and then to jump in with a fair bid,” the architect says.
Tom Early, a past president of the National Association of Exclusive Buyers’ Agents (naeba.org) doesn’t know the buyers in this true tale. Still, he applauds them for their strategy of targeting a so-called “stale listing.”
“Dramatically higher mortgage rates are bad for buyers. But because of that, the out-of-control seller’s market is cooling down a bit. Now, more sellers are surfacing. In many -- but not all -- areas that’s slightly lessening competition among purchasers and adding to the supply of available homes -- one of several silver linings for buyers," Early says.
Danielle Hale, chief economist for the home listing service Realtor.com, estimates that active inventory is now 17% higher than last year.
“Rising inventory will eventually cool home price growth,” Hale says.
Here are a few pointers for would-be buyers who wish to make the most of the changing market:
-- Exercise caution in timing your bid for a “stale listing.”
As Early says, the best moment to make an offer on a stale property is shortly after price cuts occur. Another element of good timing is to put forth your offer when the sellers are under pressure to move.
“Very often, your buyer’s agent can find out from the listing agent whether the sellers must move soon due to divorce, a financial setback or a job transfer," according to Early.
Early says that during vacation periods many “test-the-market” sellers -- including retirees free from pressure to move -- take down their For Sale signs. Most who are left are highly motivated to cut a deal.
If your agent can’t determine the seller's level of motivation from conversations with their listing agent, you can often obtain clues by talking with neighbors.
-- Don’t rule out buying a brand-new place 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.
“Look for 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 decent deal for you,” Early says.
During the worst of the pandemic, many builders had a hard time keeping up with intense demand. They’ve also been troubled with supply chain problems, especially involving lumber and other building materials. But these issues are gradually resolving themselves.
-- Recognize the limits on your leverage in the current market.
Although there are several silver linings for buyers in the current market, Early seeks to disabuse buyers of the belief that the strong seller’s market is over entirely, particularly in popular metro areas, where multiple-bidding situations still abound.
“This is not a period for bottom fishing or bargain shopping. This would not be the right time to come in with an insultingly low bid for a solid house that is already appropriately priced,” he says.
Buyers can sometimes look back with regret when they fail to act aggressively enough to obtain a place they adore. There’s no shame in offering list price or slightly more in a hot area, assuming you’ve done your homework and are convinced you’re not paying more than a couple of 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 procrastinate once you’re sure you want to buy.
Despite their recent ascent, mortgage rates remain near historically low levels. But will rates continue to rise in coming years? That seems likely, given that the Federal Reserve has announced its intention to raise interest rates in order to combat inflation. Meanwhile, there’s no guarantee that home prices will dip in the near future, considering that many millennials in their home-buying years have yet to buy their first home.
“In most popular areas, renting isn’t that much cheaper an option than buying. In addition, rental rates could rise significantly in the future. That’s why I caution a lot of frustrated buyers not to back off from their home chase and delay further,” Early says.
(To contact Ellen James Martin, email her at firstname.lastname@example.org.)