It was just a few weeks ago that real estate pros were predicting a robust springtime home sales market. Buyers, including first-timers, hoped prices would slip and that they’d finally gain a degree of leverage with sellers. But the situation is not quite as buyers hoped.
Granted, prices have cooled in some formerly overheated markets, such as Austin and San Jose. But in many high-demand markets, buyers have actually lost sway due to a severe shortage of inventory.
“We’ve gone from hot to not,” says Jeff Tucker, a senior economist for Zillow, the national real estate company. As he notes, buyers are scooping up what they can find, but a lack of choices is holding them back.
“Unfortunately, many potential sellers have ghosted the market this spring, concentrating buyer demand in the few listings that do come on the market and fueling price growth, especially for more affordable and well-priced houses,” Tucker says.
Lindsay Katz, a Los Angeles-based agent for Redfin, the national realty brokerage, says, “The total number of homes for sale has declined over the last month, going against the typical spring inventory bump.”
There are several underlying reasons why available homes are so scarce. One long-term factor is that many baby boomers are clinging to their properties rather than downsizing.
“Whether it’s real or delusional, lots of folks in their 60s and 70s expect to stay put in their properties forever,” says Mark Nash, the author of “1001 Tips for Buying and Selling a Home.”
Another factor causing homeowners to hang on rather than sell is that they wish to keep the low-rate mortgages they acquired during the pandemic. If they were to buy anew, their new mortgage would carry a much higher rate.
Lawrence Yun, chief economist for the National Association of Realtors (nar.realtor), blames higher mortgage costs on the Federal Reserve, which has steadily lifted interest rates in hopes of calming inflation.
Yun claims that the Fed’s latest rate hike, on May 3, was unnecessary and is repressing housing sales.
“We have to stop the bleeding before improvement takes place. We need to get more inventory, and the long-term solution is more home building,” he says.
Though affordability is still a monumental challenge for would-be homeowners, they’re not backing off. Rather, they’re pushing ahead in hopes of finding that rare and well-priced property.
Here are a few pointers for buyers:
-- Acknowledge that not all sellers are equally motivated.
Tom Early, a former president of the National Association of Exclusive Buyer Agents (naeba.org), says that although the overall economy is faring well, financial duress is still a common reason why many homeowners decide to sell their property.
Nash, a veteran real estate broker, advises buyers to determine as much as possible about the sellers’ situation before making an offer.
“More than 90% of the motivation for a deal comes from the sellers’ circumstances and has nothing to do with the buyer,” he says.
-- Request help from your agent on “due diligence.”
“Before making an offer on any property at any time, you’ll want to learn as much as possible about the sellers’ equity position,” Nash says.
He suggests that would-be purchasers ask their agent to research public records to determine when the present owners bought their house, what they paid and how big a mortgage they took out. Much of this information is freely available on the internet.
If they bought long before the big housing crash of 2008, the odds are good they still have substantial equity -- unless they gutted most of that with a big home-equity loan or a cash-out refinance.
“Sellers with lots of equity have much more latitude for bargaining. They can cut you a reasonable deal and still move away with a check in their pocket,” Early says.
-- Learn what you can from the seller’s listing agent.
Listing agents are sometimes surprisingly candid in responding to questions about their clients’ situations.
“If the owners are under extreme pressure to sell, the listing agent may even tell your agent their true bottom-line price to let the house go,” Early says.
But what if you find out the sellers are not under duress to sell quickly? That, too, can be useful in setting the pace for your negotiations.
“I remember when one of my clients tried to buy a family home from a retired couple who wanted to move to their vacation place. Because the sellers owned the house free and clear, they could afford to wait. So we paced our negotiations with their timing in mind,” Early recalls.
-- Don’t scratch stale properties off your list.
Have you fallen in love with a place that went on the market months ago at a bloated price? Are you confident the sellers must move soon and will eventually have to take a price cut to get their place sold?
If so, Early urges you to prepare to submit an immediate bid on the property as soon as its owners face reality and take their reduction. Make sure you have a preapproval letter from a reputable lender showing you have the income and good credit to go through with the deal.
“Sellers who’ve just sobered up and finally cut their price to a realistic level will sometimes succumb to a substantial reduction. It’s at that moment that you should pounce quickly with your fair offer,” Early says.
(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)