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Homebuyers are lowering their expectations, but that could be a good thing

High mortgage rates mean less competition.
Sale pending sign in front of a home.
Posted at 7:19 AM, May 06, 2024

Despite predictions of lower mortgage rates in 2024, that hasn't happened yet.

Mortgage rates topped 7% again at the start of May, and homebuyers and sellers may not see relief soon. But with lower expectations for the home selling season this summer, real estate agents say you can actually use that to your advantage right now.

Realtor: Bite the bullet and buy right now

Realtor Susan Huff of Huff Realty has been selling homes for 30 years to everyone from downsizing baby boomers to young couples just getting started. She knows 7% mortgage rates have put homes out of reach for many families.

But she tells buyers to bite the bullet if they can, because competition is much lower right now than it was during the crazy 2021-2022 period.

"If rates ever come down, hopefully in the next year or two, then they can just refinance," she said.

Buyer Carolyn Marsh listened and decided to bid on a condo despite a 7% mortgage.

"I knew we could refi if necessary," Marsh said, adding that she wasn't worried about the interest rate.

In a recent survey of potential sellers, more than 80% say they recently hit pause when rates started to climb, according to Kendall Bonner of Realtor.com.

"People have been waiting on average up to two years before putting their homes on the market," she said. "And we find the reason they are doing that is because most home sellers are also homebuyers.”

But Bonner says 2024 could be a good time to sell. Housing inventory is low, and buyers are eager for fresh options.

"It's not too late to sell your home right now because prices continue to be strong," she said.

What buyers and sellers should do

However, she says sellers, like buyers, should adjust their expectations too.

The Realtor.com survey found:

  • Only 12% of sellers now expect a bidding war
  • Just 15% expect to get more than asking price

Those numbers are sharply down from two years ago.
For sellers, Bonner says sprucing up curb appeal with fresh paint and pressure washing makes all the difference, and can get you higher offers.

For buyers, Bonner says:

  • Get pre-approved for a mortgage
  • Expand your search area
  • Ask specifics about what the seller is asking for before writing up an offer

Huff says buyers should look at higher rates as their friend since it has slowed down the competition.
She says the bidding wars will return if rates fall to 5%.

"When rates do drop, you're going to see an influx of people like we did a couple of years ago," Huff said, "and people are going to try to outbid each other and prices are going to escalate even higher."

So consider taking advantage of this slower market, and that way you don't waste your money.

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