Here we are, several months into what can be described as a market shift, or a correction, or a reset, or any other euphemistic term you choose to indicate that it is no longer a drunken orgy for home sellers. After several years of watching home prices explode and sellers having all the cards, we are now getting to see what happens when buyers have a chance.
Of course it hasn’t actually gotten any cheaper to buy a house, what with interest rates over 6% and likely still climbing into 2023, as that inflation problem has been quite pesky. The process has gotten easier though. Homes are staying on market longer. Pricing is more transparent. They’re getting fewer offers, and we’re even seeing (gasp!) sellers giving concessions occasionally. Listing agents have to work harder to sell houses that a few months ago would have sold themselves, which means they return my calls faster. So that’s nice, and all of those things help those buyers who are still fortunate enough to be in the market.
With new circumstances comes new strategy, and buyers need to be on top of what’s going on. There are a few key points to consider when shopping and buying in this new world order:
Goodbye Bidding Wars
I can’t think of a thing that has a wider enthusiasm gap between sellers and buyers than a bidding war: sellers salivate, buyers dread. The good news for buyers is that for most houses, they’re a thing of the past.
My office (that would be ELEETE Real Estate) keeps track of how many offers each of our sold houses received, and that average has been dropping over the past several months:
While houses were receiving an average of six offers per sale in February, they’re down to 1.4 in September. So, rather than competing with five other bidders driving the price up, it’s now you and 40% of another guy.
The Price You See Is The Price You Get
Imagine walking into Fred Meyer to buy a 6-pack of beer and the price on the shelf is $8.99. You take it to the checker, and are told that someone else is willing to pay an unspecified amount more for the beer, so if you want it you’ll need to sweeten your offer. Also, Fred Meyer gets to keep one of your six beers because the other person agreed to that as well, and if you open the beer and it’s skunky you don’t get your money back. That was the housing market in May. That is not the housing market now.
As the red and blue lines meet, transparent pricing is achieved. Back in May, houses were on average selling for 6.7% over their list price, which may not sound like much but that’s $40,000 on a median-priced home, which is enough of a gap to turn the whole endeavor of bidding the right amount on a house into a guessing game. These days, it is much more likely that the price you see on the house is going to be pretty close to the price someone pays, and on average (see the graph above), the difference between the list and sale price of a house is a whopping $302. That’s a long way from $40k.
Here’s another way to look at the same thing:
About 2/3 of houses that sell are going at or under their list price, and in August more houses sold under list than above it. April was indeed a long time ago.
Time Is On Your Side
Days on market is a metric that you never hear about until you’re deep in the weeds of housing data, whether as a professional or a battle-hardened buyer/seller. It is, quite simply, how many days it took between the day a house went on the market until it found a buyer. Now this metric is easy to manipulate- if you want your two-month-old listing to look fresh as a daisy, you cancel the listing and immediately relist, and it’ll reset the days-on-market clock. Your Zillows and Redfins and whatnot will then send out emails saying it’s new, because they’re easy to fool.
A savvy buyer’s agent will look at a slightly different metric, the collective days on market (CDOM). Or it might be comprehensive; it doesn’t really matter what the “C” actually stands for. It counts up all the days the house has been presently listed, with our without listing agent shenanigans. It’s a clearer picture of how long that house has been on the market, and knowing how long that is becomes a big part of a buyer’s bargaining position. That number has been rising dramatically in recent months:
This past spring was a frustrating time to be a buyer who wanted to go away for a long weekend, since there was about a 50% chance that if the house you wanted went active that weekend it would be gone by the time you got back. The median amount of days on market was as low as four. That has changed: now with the average and median days-on-market being much higher it’s 25% of homes finding a buyer in that first weekend. Most houses are now finding their buyers at some point after having spent a week on the market, so go ahead and treat yourself to that vacation- the house will probably still be there when you get back.
Seller Concessions: They’re Back!
Once upon a time, say around 2009 when it was really difficult to sell a house, buyers could ask sellers for credits and other concessions and they would actually get them. Over the last couple of years, requests for seller concessions were generally met with a response that may have included eye-rolling, open derision, and/or a mocking request back to the buyer to check a calendar and see if it’s 2009 again. Well, this ball is getting to be back into the buyer’s court, and it’s no longer laughable to request concessions of sellers. Some sellers are even being proactive here and offering things like credits toward interest rate buydowns to sweeten their listings. Oh how the tide has turned.
Yes, even with everything I described above, right now it costs most people more to buy a house than it did six months ago. The prices have dropped, but not enough to counteract the huge jump in interest rates, and all indications are that those interest rates aren’t dropping anytime soon. We take our blessings big and small though, and if you’re fortunate enough to still have a place in the market the home buying process will not be as stressful as it was.
I am a licensed real estate broker in the state of Oregon with ELEETE Real Estate. Data is sourced from RMLS, and all analysis is mine and mine alone. If I can be of assistance in your home search or sale, please contact me at eli.cotham@eleetere.com or via the contact page.
