The Housing Market Is Due for a Reset: What This Means For Homebuyers

The housing market is in a state of flux with new and existing home sales on the rise (as of August 2024) but overall home affordability declining, according to the U.S. Department of Housing and Urban Development. Some real estate experts feel it’s due for a reset.

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As GOBankingRates recently reported , housing market “resets” tend to occur every eight to 12 years. Therefore, with COVID relief funds having slowed the inevitable, the U.S. is overdue. A reset often means that homes become more affordable for buyers, but sometimes this is due to economic hardship, such as a downturn or recession.

With the Federal Reserve Board promising interest rate cuts, what could a housing market reset mean for the average homebuyer ? Let’s explore.

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A Change in Inventory

According to Jennifer Carey, associate broker and director of sales with real REAL New York, LLC , there’s been an inventory glut everywhere because of the interest rates. “Sellers have been afraid to put their homes on the market because they likely have a more favorable rate than what they would be picking up if they sold their home,” she explained.

However, with interest rates likely to drop as much as a quarter to a half a point soon, and perhaps a full point by 2025, Carey said, “I do suspect we are finally going to see a nice uptick in inventory. So that could be a fantastic thing for buyers who have just been not finding any great options.”

However, if buyers can find something in this low inventory market, Carey recommends buying now, because competition will get steep later.

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More Buyers Heading to the Market

Carey explained that when inventory goes up and interest rates go down, “A bunch more buyers are going to wait for [that] time to come on the market and to start shopping. And then that’s going to drive up prices. So if you have more buyers and you have more competition, those sellers are just going to be getting the highest number that they can.”

If you want to get ahead of the competition, and you’re ready to buy, it’s time to do it.

Don’t Wait for the Rate Drops

Carey said if you can find a great property now, you should go for it. “It might not be the lowest interest rate, but that’s why God invented refinancing.”

In the long run, she said you’re likely to save more money on a lower priced home than on a quarter or half a point in interest rate.

“Does that affect your pocketbook in your monthly mortgage payment? Sure. But it’s just not that significant. So I think the spending less for the property is going to be more worth it in the short run,” she added.

Ask Sellers To Buy Down Your Rate

On the other side, if you are looking in a market that doesn’t seem to be performing well for sellers, and the interest rate is higher than you like, you can always try to negotiate with the seller to buy down your rate.

“Nothing’s stopping you from throwing into your offer to ask the seller to buy down your rate,” she said. “Many parts of the deal are negotiable and maybe if you offer the right price to the seller, they would be interested in paying X number of dollars to get you that lower interest rate if that’s what you’re concerned about right now.”

She said that homebuying is about “creative negotiating.”

Seasonal Shifts May Not Reflect the Actual Market

Another thing Carey sees around September is an overall surge in homebuyers. However, she considers it seasonal and recommends not letting it pressure you into thinking you should rush to buy out of fear of missing out on a great deal.

“I’m not sure if people want to buy in September so that they’re in a new home by the holidays or so the kids can get into the school district of their choice, but I am certainly seeing something of a spike in buyers, but not necessarily that much new inventory,” she said.

Don’t Assume a Listing Is Stale

Another thing to be careful of in this market is to keep up on your comparative market analysis of any market you’re looking in. For instance, never assume that a listing is “stale” and think you’re going to be the only buyer bidding on it, Carey said.

“I see some buyers being too aggressive and losing properties that they love just because they see a property has been on the market 90 days, and they think nobody wants it; now’s my time to swoop in and get a deal. But what they don’t know is suddenly all these other buyers are back in the market. So what may appear to them as a stale listing might not actually be a stale listing.”

She said it’s important to do your research to not lose something that you actually want.

Whatever changes are to come in the housing market, there are lots of pros and cons to weigh. Most importantly, never buy a home before you’re ready, no matter how good the timing seems.

This article originally appeared on GOBankingRates.com : The Housing Market Is Due for a Reset: What This Means For Homebuyers