Updated: June 1, 2022 at 10:29 a.m. ET
What buyers and sellers should know about buying a house this season.
Want to buy a home? Here’s what pros say you may want to know this home buying season. Getty Images/iStockphoto
Home prices have been climbing, as have mortgage rates (you can see the lowest mortgage rates you can qualify for here), and many buyers are wondering: What’s in store for us this summer? We asked economists and real estate pros to share their thoughts and predictions.
More listings are getting price cuts
Data from real estate listing site Refin released in May found that nearly one in five home sellers had dropped their price, the highest rate since October 2019. And Zillow economist Nicole Bachaud says faint signs are starting to emerge that the market is rebalancing. “The share of listings with a price cut is creeping up, possibly a sign that sellers cannot be quite as ambitious in their pricing strategy as they could have in recent months. Inventory continues to rise as well, though it’s still significantly lower than pre-pandemic norms,” says Bachaud.
Home price growth will start to slow soon, but it may not happen as quickly as buyers hoping to buy this summer would like
Seasonally, we’re at the point in the year where we tend to see peak home prices, says Danielle Hale, Realtor.com chief economist. “There are a variety of reasons for this, including the fact that a lot of the homes for sale and sold at this time of year are larger, family homes,” says Hale. What’s more, she says while listing prices have shown acceleration or a faster rate of growth, in recent weeks, sales prices have seen steadiness or slight easing in momentum. “This suggests that home prices could be at a bit of a turning point, in which slower growth is on the horizon,” says Hale.
For his part, Greg McBride, chief financial analyst at Bankrate, says: “The market will cool somewhat as more would-be homebuyers have been priced out by rising home prices and soaring mortgage rates, but even a tempered level of demand will still exceed the ultra-low level of supply. The pace of home price appreciation will moderate but homes will still be selling for much more than they did six or 12 months ago, even if sellers don’t get the moonshot price they’re currently asking.”
And Bachaud also thinks price growth will start to slow — but not yet. “Homes are selling as fast as they ever have, after only seven days for the typical home and nearly half of homes are selling for above their list price,” says Bachaud.
Prepare for inventory changes
Bachaud says a more balanced market is likely around the corner as rising costs may keep enough would-be buyers on the sidelines, allowing inventory to begin catching up with demand. And for his part, Steve Reich, chief operating officer at Finance of America Mortgage, says seasonality definitely comes into play as spring and early summer are typically prime-buying windows for families looking to get a larger home or relocate because kids are out of school. “As a result, more inventory may come on the market,” says Reich.
That said, buyers wanting a new construction home may find a challenge, Reich says: “The potential for prolonged inflation and increased prices across the board will likely trickle down into higher costs for new construction and make it more expensive to bring new builds to market, further complicating the housing supply,” says Reich.
Buyer demand has softened
As MarketWatch recently reported, pending home sales fell for sixth straight month in April, thanks to high home prices and mortgage rates. And Redfin reported that searches on Google for “homes for sale” for the week ending May 21 were down 13% from a year prior. “Right now, as the market tries to settle in at higher rate levels, buyer demand has gradually softened as consumers assess what their affordability looks like. Both buyers and sellers have moved to the sidelines to see where the dust settles, which is fairly common in periods of high volatility and uncertainty. This is definitely a wait and see moment,” says Robert Heck, vice president of mortgage at online mortgage marketplace Morty.
Alisa Wolfson is a reporter for MarketWatch Picks.