POST TAGSMortgage News
Blog posted On November 29, 2022
Today, the Case-Shiller home price index showed that the prices of homes declined for the third consecutive month in September. Annual price gains appeared to have peaked roughly six months ago and have been declining ever since. This cooling may come as a shock to sellers, who had enjoyed nearly two years of red-hot prices and sky-high profits. Now as the market is shifting, many sellers are swallowing a tough pill – that their home may not sell for the same price that it could have earlier this year.
Sellers struggling to keep up with the speed of price change
The market is changing – fast. Home prices are currently changing three times faster than usual. This is making it extra difficult for home sellers to set their listing at a reasonable price, which is why it's always a good idea to work with a Realtor who can help you. In addition, HousingWire Editor in Chief Editor Sarah Wheeler talked with appraiser Ryan Lundquist to provide some pricing guidance in the modern market.
Comps, or comparable properties, are often used when determining a listing price for a home. Typically, they’re recently sold homes in the same area as the listing that are similar in size, year built, condition, and other features. However, when the market is changing this fast, Lundquist advises sellers and agents not to look at recently sold properties. “Price according to properties that are similar and are getting into contract,” he says. “[Closed] sales are really like historic artifacts because they tell us what the market used to be like.” If a home recently closed but went into contract in May, then it reflects May pricing, not recent pricing. You want to look at what’s going on in the market right now. “The best view of that is to look at listings that aren’t selling – that tells us what it’s probably not worth – and then look at properties that are getting into contract and moving.”
A lot of times you’ll see in the media that median home prices are doing this or that. While this can be good for a general sense of market trends, it may not be the most reliable source for pricing your specific home. With that said, “median price is back to October 2021.” But median price decline doesn’t always mean value decline, according to Lundquist. It’s important to know the difference and focus on the specific comps that are under contract rather than general trends.
“That seller honeymoon from 2020 and 2021 is simply over,” notes Lundquist. “So, sellers probably have to concede that they’re probably going to have to give credits to buyers.” Many more homes are selling with seller concessions like closing costs, discount points, and mortgage rate buy down fees.
This will likely be the hardest for sellers to understand. You can’t price aggressively like 2021 and early 2022. “Sellers have had a real reconning where they’ve had to wake up and realize that they’re no longer running the show,” Lundquist says. So, when the buyer comes in and asks you to lower your price, it may be worth resisting, but you’ll likely need to seriously consider it if you want your home to sell fast. “[Sellers] need to not get bent out of shape when they don’t sell at the original list price […] I think it’s time to bend toward buyers.”
Many people are wondering how the spring market will unfold. While it could depend on mortgage rates, it’s very difficult to affect the seasonal patterns in real estate. In other words, Lundquist predicts that the spring market will pick back up again. More buyers, more homes for sale.
Although the housing market is settling down for the end of the year, the new year will be here before you know it. Stay tuned for more updates on market trends or reach out to us for more information.