I won't say crazy is the new normal, because I don't like how saying that feels, but many things are continuing to change rapidly. Unfortunately, things are changing so fast that it takes a lot of work to keep track! So that's where I'd like to start today, keeping track of what is actually going on.
Are home prices going down?
The short answer is yes. The national median existing home sale price hit its peak in June at $413,800. In September, it dropped to $384,800, according to the National Association of Realtors (NAR). Some areas have seen more significant price drops than others, and in some areas prices have increased since June. Therefore, it's essential to narrow down where you're looking to get a better estimate of what a home will sell for. For some readers, this may seem old hat and I encourage you to move down to the next session. For the rest of you though, I'd like to introduce you to a couple of price estimating tools.
Firstly, I can't recommend enough using a history of home sale prices rather than a history of estimates. I see that a couple of sites offer a historical estimate feature, and I gotta say, it is not worth your time. Why look at a history of price guesses when you can look at the actual price history? Especially when those estimates may have been revised later. At that rate, the feature doesn't even tell you how accurate they are at making estimates in the first place. Waste of time. Instead, look at history!
There are a few ways to get to this. If you don't like looking at graphs the way I do, you can scroll through recently sold homes using any of the major listing sites. I did a side-by-side scroll through Redfin, Zillow, and Realtor.com of the most recent home sales in 19713, and all three sites agreed on what homes had been sold when and for what price for the first several entries. Not all sites will have all listings because they may pull from different Multiple Listing Service (MLS) databases, but there is a lot of overlap. The advantage to the scroll method is you'll be able to match which properties are most like the one you're interested in, so you can really fine-tune what info you get. However, this method does involve a lot of scrolling and comparing by hand.
For less scrolling and to see information about the precise area you're looking for, I recommend a parcel search. There is a little bit of a learning curve, but afterward,
you'll have a wealth of data at your fingertips about your potential home, the homes around it, and even future construction in the area. Check out my earlier article about parcel search if you're interested.
For those who do enjoy a nice graph every now and then, Realtor.com has the option to see a graph of median home sold price with the median list price of homes per city, zip code, and even neighborhood. The data includes properties listed with Realtor.com and excludes land, multi-family properties, etc. A side-by-side comparison of listed vs. sold can also give you a more realistic impression of what homes are going for. To get there on a desktop:
1. Search for the area you're interested in.
2. Hover over Buy in the top menu.
3. Select 'area' Housing Market in the middle column.
A column on the left will come up with data. For example, it looks like this for Sussex County, DE:
Sussex is one of those areas where house prices have increased since June. If you hover your mouse along the timeline you can see the monthly median. Also, for the graph above, I deselected median listing home price, but by clicking on it again I could see that graph too. That little section below, about whether the area is more of a buyer's market or a seller's market? Also good stuff. The measure is based on the number of homes for sale, sometimes referred to as inventory in real estate lingo, and can give you an idea of how much wiggle room there is. It's the kind of thing that's very good to know for buyers and sellers.
To narrow your results down further, you can search for the neighborhood you're interested in, but depending on the size of the neighborhood, you may only get a few recently sold houses to compare. To get the same information on mobile, search the area you are interested in, tap the three horizontal lines in the top left of the screen, then tap Housing Market.
What's coming up next?
Nobody knows. On Monday, I read an article on Forbes about housing market predictions for the rest of 2022. On Wednesday, I went back to reference that article and had to do a double take. It's a rather different article now. For example, sections of the piece changed from 'Housing Market in Transition' and 'Will Home Prices Continue to Rise?' to 'When will the Housing Market Crash?' and 'Are a lot of Foreclosures Coming?'. Incidentally, according to the article, the housing market probably won't crash, and while some foreclosures are coming, it is not 2008 again. Also, as someone who went to grad school pretty soon after the Great Recession and therefore had to study said recession in absolutely every class, I want to personally assure anyone reading this- It's not 2008 again.
That said, If you've been reading real estate news, you know it's all changing around and up in the air like juggler's balls set on fire. For today though, let's focus on a different question.
Are you ready to buy a house? Or you're ready to sell a house? How do?
Here are a few strategies:
If you're buying a house, get a pre-approval letter from a lender and refresh that bad boy every thirty days or so.
If you're selling your home, look at nearby similar properties from no more than the last three months and price within 10%, according to Realtor.com. Otherwise, you may be stuck with an 'appraisal gap,' which is a nice way of saying the appraiser may point out to the buyer that your home is not worth as much as the buyer was offering.
Negotiations: Both sides of the table may wish to sharpen up their negotiating skills. Buyers can now ask for things like home inspections, and in my humble and completely unbiased opinion, they definitely should. Sellers may also offer to cover part of closing costs.
You've been trying to buy a house and it's very hard?
You are not alone. According to a Cinch survey of 1,003 Americans who tried to buy and/or sell a home within the last year 51% of prospective home buyers had a deal fall through, 20% of sellers, and 23% of respondents had contracts fall through as both a buyer and a seller. That only leaves 6%. Only 6% of people who tried to buy/sell a house did not have a deal fall through.
Also, 16% of respondents listed buyer job loss as one of the reasons a home contract fell through. So, if you're out there and you keep hearing about how great the job market is, but instead lost your job and your home purchase, you are not alone.
For those buying new construction homes
There are a couple of possible strategies to get the most out of your new home.
Contingencies. Again, in my totally humble and unbiased opinion, you should absolutely get your new home inspected- at least at the pre-drywall stage to spot concerns before they become hidden problems and have a handy guide available for the lifetime of the house. Check out this recent article for more on the benefits of a pre-drywall inspection.
Warning! This next one is not for the faint of heart and it's only rumored to be delivering results. I haven't seen an article on it yet, just some Reddit posts: renegotiating with the builder after the home is complete. Only do this if you are prepared to walk away from the house and the earnest money you have already spent.
The builder will probably be extremely reluctant to lower the price outright because that has the potential to bring a storm of people asking for price discounts. Lowering the price may also get the builder in trouble with the construction company they work for. But! There are some other areas where the builder may be more accommodating.
The builder may be willing to pay part of the closing credits to buy down your rate by 1-2%. That way, they keep the same purchase price, but you get a much better rate. You may instead be able to get upgrades or discounted upgrades to keep the price listed as high. Or possibly a cash rebate for similar reasons. Please just keep in mind the builder may instead decide to take the risk themselves and sell the house cheaper to someone else using your money.
Bottom line
If this-
is what the housing market feels like to you right now, you are not the only one. Bravo for being a brave enough adventurer to keep slogging through it! Good luck and, as always-
Thank you for reading!