Homebuyers should hit the ground running with their home search. Have updated pre-approvals and be ready to strike. The iron is hotter than it has been in two years for the next three months. Here’s why:
1. Inventory will be at its peak
The frenzied market that has all but consumed inventory has started to calm down just enough to make this more of a buyer’s market than we’ve seen since 2019. Is inventory still lower than in past years? Yes. But over-zealous sellers with overpriced homes on the market that are lingering longer than before are boosting inventory. Additionally, many family-buyers have dropped out of the active search now that school has started and they’ve rooted again until the spring market, which diminishes competition at least for now.
In the chart below, from the Massachusetts Updates page, you can see that inventory has been lower than ever, but it’s increasing and is at the highest point since about November of 2020. The other story this chart tells is that inventory always drops at the very end of the year into the beginning of the following year because buyers get motivated around New Years and all over again start to consume whatever inventory is available, confirming that the next 10 weeks will be the best time to buy before competition increases at the first of the year as it always does.
2. Pricing will be less aggressive
Sellers have had the upper hand and could basically name their price. Typically, the year is broken down into a seller’s market from January until about the summer when it begins to shift but is still a seller’s market, and by September, the market swings into the buyer’s favor for fall.
Since the market opened back up after the COVID stay-at-home mandate around June 2020, it’s been a seller’s market. Many sellers didn’t list at all due to safety concerns, many renters wanted to buy a property with more open space and as renters, they had nothing to sell to boost inventory. Therefore, the low inventory and sky-high demand created extreme competition. This climate made it so many buyers ended up having to outbid one another, waive contingencies, lose out on homes, and inevitably pay over asking to get the home they wanted. Average prices skyrocketed. See the graphic below.
Sellers at this point of the game are now thinking that they could price their home for what their neighbor sold for months ago. This, of course, isn’t how it works. And now these active sellers are at the precipice of needing to adjust their prices. Why is this? The more buyers that want a property end up competing and the seller ends up selling for more. Now that there are fewer buyers competing, there is a smaller chance that they’re willing to pay over market value to secure the home. Sellers that price according to market value, not the sale price or even higher than their neighbor got months ago when it was a frenzied market, will end up selling fast. The sellers that overprice? The house sits. A house sitting on the market needs only one thing to sell, a lower list price. This is going to help buyers as long as they don’t think there’s something wrong with a house that’s been on the market for longer than a day.
This fall will have fewer buyers and more sellers; in fact, it already does. It’s not a typical buyers’ market by far. It’s still a seller’s market ultimately, but less intensely so than we’ve seen since the fall before COVID. Sellers will therefore be adjusting their list prices if they’re priced too high, fewer buyers bring about less competition, and less competition will keep prices from continuing to rise at the pace they’ve been climbing, though they will still continue to increase for the year overall. Then they will be back to increasing monthly starting in January.
3. Interest rates are likely to increase
Fortunately for buyers, despite the continual increase in prices, mortgage rates have remained historically low. Though we have had the pleasure of rates hovering slightly around 3% and, at times, a good amount lower, this isn’t likely to continue forever. Buyers right now, with the diminished demand, increased inventory and rates this low should make their offers. The only way a buyer is going to achieve the lowest monthly payment is by buying now. If prices fall, of course, the payment would be lower, but they’re not going to fall, as explained here, at least not any time soon. What’s likely to happen is prices will continue to climb as well as rates. But even if prices don’t rise, naturally as rates increase, so will the monthly payment. Now is the best time to buy! It’s in the numbers.
Anthony recorded a brief video going over all the reasons that now it’s the best time to buy, click here to view. Buyers have had a frustrating experience since this pandemic has completely disrupted the real estate market as we know it. Sellers have had the upper hand, it’s true, but most sellers eventually become buyers, so everyone’s had a taste of it. It’s still a hypermarket heavily influenced by low supply and high demand, but these next few months really will be a little less intense for active buyers. This phenomenon is occurring all over the country, not just the Northeast (although the seasonality impacts are stronger in the northern states- so if you’re looking to buy local to upgrade or downsize, buy a second home in Florida, or relocate entirely, now is the time to act.