Tenacious homebuyers have reason for optimism, so long as they’re patient. That’s according to Robert Reffkin, the CEO of Compass, one of the nation’s largest real estate brokerages.
Reffkin allows that the country is suffering a severe shortage of available listings. He estimates that fully a third of current homeowners are hanging onto mortgages locked in at around 3%.
“They view those mortgages as a financial asset” at a time when prevailing rates are pushing up against the 7% mark. That’s why they’re not willing to move now, he says.
But he projects that as soon as mortgage rates fall back into the 5% range -- as financial analysts expect -- that could unleash a surge of new listings that will intensify sales.
“This will bring a ... buying craze all over again,” Reffkin predicts.
Who’s hankering to list their home as soon as the timing is right?
Stacy Berman, a longtime real estate agent in the Washington, D.C., region, says many seniors who’ve owned their property for decades would soon be ready to sell once mortgage rates moderate.
“It’s not uncommon for seniors who are moving to a different part of the country to take out a new mortgage for their next purchase. So it’s logical many are rate-sensitive,” Berman says.
But so far, retirees in the baby boomer age cohort, born between 1946 and 1964, have been reluctant to list their properties, a primary reason why available listings are currently scarce.
“I’m practically begging potential sellers to list, especially those in the more affordable price point, because those are the homes buyers are hungry for,” says Shauna Pendleton, an Idaho agent who specializes in first-time buyers.
Who is feeling an urgent need to get on the property ladder? Most eager are young people in their 20s and 30s, along with adults of all ages facing job changes or military reassignments.
“What’s more, there are numerous recent college and grad school graduates who are anxious to buy their first home,” Berman says.
Besides the expectation that home listings will become more plentiful, financial analysts anticipate that listing prices will soon moderate, even in areas where multiple offers are now common.
“The velocity of price increases will certainly diminish significantly,” says Melissa Cohn, a vice president for William Raveis Mortgage, a Connecticut-based lender.
Here are a few pointers for determined buyers:
-- Inform yourself about local property values.
Eve Alexander, a longtime real estate broker who works solely with buyers, says buyers need context on prevailing values to make certain they don’t bid too much.
“For comparisons, try to identify five to 10 comparable properties that have sold recently in the area where you’re looking,” Alexander says.
If you’re seeking to buy in a neighborhood with widely varying properties, it’s helpful to compare the homes on your list on a price-per-square-foot basis. Then adjust for differences in size and home features.
After estimating the current market value of the home you wish to buy, it’s time to decide how aggressive an offer you want to make.
“You won’t want to push the limits if you’ve fallen in love with the property and feel it’s a do-or-die situation,” she says.
On the other hand, you might choose to make a lower offer if there are other available homes in the area that would meet your needs equally well.
-- Ignore comparables from “market testers.”
Eric Tyson, co-author of “Home Buying for Dummies,” says in every market there are a few sellers who won’t budge from an unrealistically high price.
“It’s a given that some supposed sellers aren’t really motivated to make a fair deal,” he says.
How can you tell which sellers are merely testing the market and will never negotiate seriously with anyone who bids less than their lofty list price?
Tyson recommends you ask your agent to find out if previous offers have come in on the property you want. If the owners have already rebuffed one or more decent offers without so much as a counterbid, this indicates they’ll probably resist reason with you, too.
The good news for buyers is that information on past offers is often readily available through the listing agent.
While there’s no harm in trying to reason with market testers, Tyson says you can waste a lot of time and energy trying to budge people who won’t even entertain a fair offer. Better to look for someone truly anxious to sell -- perhaps because they’re making an out-of-state job move.
-- Seek information about the seller’s equity position.
Are you seriously interested in a home but have yet to submit an offer on it? If so, Alexander says it’s wise to inform yourself on the sellers’ ownership stake before you bid. As she says, those with more equity have more potential room for compromise.
“What you’re looking for are insights into the mindset of the sellers,” Alexander says.
One source of clues on the owners’ equity position can be found by searching local government land records. At the minimum, these records (usually available online) should tell you when the current owners purchased the property and the original price they paid.
“If the sellers bought the house a couple of decades ago and haven’t refinanced, they should have a lot more equity,” Alexander says.
(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)