Real estate agents confirm what housing data is starting to show: More homebuyers are emerging from their self-imposed hibernation.
The volume of mortgage applications for home purchases rose 25% week over week, the Mortgage Bankers Association (MBA) survey for the week ending Jan. 13 found. Housing sentiment ticked higher at the end of last year, per Fannie Mae. And home builders are reporting an increase in buyer traffic in January, the first uptick since December 2021, according to an industry survey.
These buyers are hoping to reap the rewards from a more favorable market, bagging seller incentives along with a slightly lower mortgage rate, before the spring-buying season attracts more competition.
“I had one of my clients at Meta and another from Microsoft who were active up until September of last year reach out to me last weekend,” Jeff Reynolds, a broker at Compass and founder of UrbanCondoSpaces.com, told Yahoo Finance. “They had wanted to see what the market would do, and since it seems to have stabilized and rates are down, they are hoping to get a step ahead of what would inevitably be a real estate bottom.”
‘Bringing people back in’
The dip in mortgage rates in recent weeks has taken some of the edge off of the record-setting ascent rates clocked in last year. Last week, the average rate on the 30-year fixed mortgage — the most commonly used home loan for a purchase — settled closer to 6% than 7%, fitting into more buyers’ budgets.
“Interest rates are better for first-time buyers. I think naturally it’s just bringing people back in,” John Downs, senior vice president at Vellum Mortgage, told Yahoo Finance.
At the same time, home prices have also softened, with the median list price falling to $400,000 in December, according to Redfin, down 11.1% from June’s peak of $449,000.
“The majority of activity is from new buyers,” Reynolds said. “In our microclimate in downtown Seattle, the majority of activity has hit really affordable price points. That’s driven mostly by that millennial buyer, that younger buyer, or first-time buyer finally taking advantage of market conditions — maybe for the first time.”
‘Picking for deals’
The buyers who are coming back are also getting gutsy, knowing that the sellers who remain in the market are open to negotiation.
“In 2022, buyers set the market by bidding up, which led to escalating prices and essentially having to pay to win,” Downs said. “Now, instead of waiting for listing prices to drop, buyers submit offers with big discounts and make the seller make a decision. And that seems to be working.”
At least 16.6% of homes sold in December had a price cut, Realtor.com data found, an increase from 7.1% a year ago. Even home builders are squishy on price.
One of Monte Miner’s clients got $15,000 off a newly built home originally priced at $409,000, according to the real estate agent at Ironwood Fine Properties in Arizona.
“Buyers are coming back, but they are picking for deals. Let’s say a house is listed for $400,000 — a lot of the offers coming in are under that number,” Miner said. “Some sellers’ pricing expectations are stuck in the past, like three months ago. It’s different now.”
Not only are some folks getting big price reductions, they are also snagging seller concessions to further ease the burden of still-high home prices.
For instance, at least 35% of builders reduced their home prices in December, data from the National Association of Homebuilders found. Another 62% of builders continued to use incentives to attract buyers, including rate buy-downs and paying points. According to Redfin, roughly 42% of homes sold in the final three months of 2022 included a seller concession, such as cash for repairs or closing costs.
“If you don’t haven’t enough money for closing costs,” Downs said, “sellers are offering to pay it for you,”
Timing is everything
With rates finally inching down, now could be an opportune time to purchase a home before the spring season is in full swing, Downs said. But you need to be prepared. Having a pre-qualification ready, setting a budget, and talking to a real estate expert can increase your…