As home prices start to dip, prospective home buyers may be getting a bit more enthusiastic.
The median price for existing-home sales slid 2.4% to $403,800 in July from June’s record high of $413,800, according to the National Association of Realtors.
Meanwhile, 40.5% of all prospective home buyers (and 45.3% of first-time buyers) say the economy is currently in a recession, according to a Realtor.com survey.
As a recession generally means lower home prices, it’s no great surprise that 45.7% of those surveyed expect to purchase a home within the next six months. That compares with 49.5% in July 2021 and 43.9% in July 2019, before the covid pandemic began.
The share of prospective buyers saying that a recession would make them more likely to purchase a home is up to 27.1% from 24.7% a year earlier.
The buying enthusiasm comes despite this year’s surge in mortgage rates. The 30-year fixed mortgage rate averaged 5.89% in the week ended Sept. 8, more than double the year-ago level of 2.88%, according to Freddie Mac. The latest rate is the highest in almost 14 years.
Less CompetitionAs high home prices and mortgage rates have driven many potential buyers away from the market, that has made things easier for those still in the market.
“Just 9.4% of buyers report being overbid, down from the peak of 12.6% in April and back in line with the responses from early 2021,” the Realtor.com survey said.
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The easing of competition among buyers is “consistent with changes we see in the market at large,” Realtor.com said.
“The share of listings that have seen their price reduced has almost doubled year-over-year, and the number of days a listing spends on the market has started to rebound from an all-time low a few months ago.”
To be sure, given all the demand from first-time potential buyers, they are “having more problems,” with 12.2% saying they have been overbid, the survey said.
Overbidding Still an IssueAnd even though overbidding is on the decline, “it remains much more prevalent than it was prior to the pandemic, when the share of respondents reporting being overbid hovered around 4%,” the survey said.
“Adding fuel to the competitive fire is buying activity by large investors, who constituted a larger portion of home sales and made more all-cash purchases during the same pandemic period [when] survey respondents reported being overbid the most often.”
Expensive housing costs have potential buyers searching for smaller homes, with 8.4% looking for condos or apartments in July, the study said. That’s the highest share since January 2019.
Also, home shoppers are searching far and wide for product, with a record high 33.6% looking to buy in another state.
Gazing at the big picture, prospective home buyers may be damned if they do buy now and damned if they don’t.
If you wait, you may enjoy lower home prices, as the economy continues to weaken. But waiting will also likely mean higher mortgage rates for you, as the Federal Reserve keeps raising rates itself.