Despite a historic slowdown in the U.S. housing market, home prices have proved remarkably persistent. It’s the sellers who are finally ready to drop their prices significantly that are still getting sold successfully. This pattern can be seen in the growing majority of markets, especially with many buyers waiting on the sidelines due to high mortgage rates.
In that Dallas suburb, homeownership advocate Yasmin Asberry experienced discrimination of a different sort when it came to selling her house. She knew she was being aggressive, but she began at an initial asking price of $400,000. Finally, after reducing the price twice – first to $385,000 and then $365,000 – she got an offer. When the time came to sell, Asberry even thought about waiting until spring. She wished for a better market if buyers walked away from her last asking price.
The Impact of Rising Mortgage Rates
Daryl Fairweather, chief economist at Redfin, explains that for millions of Americans who bought during the pandemic, they locked in an ultra-low mortgage. The majority of homeowners, 83%, are unwilling to trade these favorable rates for today’s much higher rates.
“For sellers, their option besides selling their home is to stay in their home with really cheap mortgages,” – Daryl Fairweather.
Yet this reluctance has caused a dramatic spike in home-purchase agreement cancellations. According to Redfin estimates, in August, about 15% of homes that went under contract ended up canceled, equating to about 56,000 agreements. This figure marks the highest August cancellation rate ever recorded, according to Redfin.
Several sellers are choosing to delist their homes or keep them on the market for extended periods, hoping for a shift in market conditions or finding a buyer willing to meet their initial price expectations.
“A lot of sellers who aren’t getting the prices they were hoping for are choosing to delist their homes, or they’re just keeping their homes on the market for a really long time, hoping that the market changes or a buyer comes along who is willing to pay the high price,” – Daryl Fairweather.
Negotiation Challenges Among Sellers and Buyers
Real estate agents such as Angie Guillette have seen a widening gap between what buyers and sellers will agree to. The prevailing market conditions have pushed many prospective buyers to be more risk averse. They are gun-shy about entering into financial obligations beyond their budgets.
“That strategy doesn’t really work, because buyers are facing these high mortgage rates, and they increasingly can’t afford to pay both high prices and high rates,” – Angie Guillette.
With these conditions as the backdrop, many sellers are unsure as to how they should approach negotiations. Likewise, Heather Anschuetz advises buyers that a lot of these sellers are motivated to negotiate their prices. Frequently, they push back on anything that sounds like a repair, or vice versa.
Asberry felt this personally when she had to cut the price of her home more than she would have liked. Her highly adept negotiating skills with buyers turned up the heat in negotiations. As a result, she sidestepped the cost to make other essential repairs before finalizing the sale.
“Even though my sellers are ready to sell, they’re ready to sell at a reasonable price,” – Heather Anschuetz.
Market Trends and Future Outlook
Though some areas have faced challenges, overall the market has seen a rebound in several positive areas. According to recent data from Intercontinental Exchange, it was a bullish September indeed with 80% of U.S. markets showing price jumps. That’s the largest share we’ve recorded in nine months! Yet this growth was mainly powered by the smaller cities of America’s Rust Belt states.
It’s something that sellers like Asberry didn’t expect, thinking they would have no trouble selling their homes. They faced tremendous hurdles in getting to their original price targets. This left many at-risk states scrambling to negotiate hard terms or ultimately face the possibility of having to leave the exchange market altogether.
“When we first listed it, we were under the impression that people were still excited to buy homes and that they were getting snapped up pretty quickly,” – Yasmin Asberry.
Ultimately, Asberry’s experience underscores the complexities of today’s housing market. Through tears, she told them that she was grateful to finally get an offer worth accepting after dropping her list price more than $40,000. The proceeds from that sale didn’t even cover her relocation expenses. Moving to Washington state ended up costing her another $15,000.