Back HomeThe Strange Game of Chicken Happening Between Homebuyers and Sellers: Who Will Blink First?
By Margaret Heidenry…Feb 17,2023
The real estate game is at a stalemate that shows no signs of budging anytime soon, with neither buyers nor sellers willing to make the first move.
Buyers have little incentive to lead the way. According to Freddie Mac, they’re battling high home prices and climbing mortgage rates, which rose to 6.32% for a 30-year fixed-rate mortgage in the week ending Feb. 16.
Meanwhile, home sellers—who, a mere year earlier, enjoyed packed open houses and bidding wars—are now battling to stand out from hordes of other sellers, as the pool of available homes soared 70% higher for the week ending Feb. 11 compared with the same period last year.
“The market’s abrupt adjustments over the last year have made it harder for all participants to determine their own boundaries, let alone figure out how to meet in the middle so that a transaction can take place,” says Realtor.com® Chief Economist Danielle Hale in her analysis of housing data for the week ending Feb.11.
But amid the backdrop of soaring inventory and still-high home prices, another data point suggests some sellers might be finally willing to change up their strategy.
“January data shows that the share of home sellers making a price reduction was more than twice as large as one year ago,” notes Hale. Indeed, 15.3% of sellers in January slashed their prices compared with 6% a year earlier.
We will analyze the latest real estate statistics and explain what it means for homebuyers and sellers in this latest installment of “How’s the Housing Market This Week?”
Why price cuts don’t necessarily mean bargains
Despite these price cuts, listing prices are still high. In January, they clocked in at a median of $400,000, and they increased by 7.9% for the week ending Feb. 11 compared with that same week a year earlier.
Plus, mortgage rates remain roughly 2.5 percentage points higher than last year.
This one-two punch of high home prices and mortgage rates has sapped buyer motivation, adding to the current real estate standstill.
“High home prices and mortgage rates have required budget contortions from buyers,” explains Hale.
Some house hunters have just given up, letting listings grow stale. For the week ending Feb. 11, homes lingered on the market 23 days longer than they did this same week a year earlier. That’s the 29th week in a row that sales have grown more sluggish.
Indeed, Hale notes the days a typical property spent on the market in 2023 compared with 2022 has “grown sharply in recent weeks.”
Meanwhile, the dearth of sellers listing new homes continued its 32-week run, with 13% fewer homeowners listing their homes for the week ending Feb. 11 compared with this week last year.
How buyers and sellers should change their strategies
So how do both buyers and sellers work together to get the market moving again?
“Both groups will need to adjust their expectations and be aware of the slower market pace,” says Hale.
Cash-strapped buyers do have an abundance of one thing in the real estate game: negotiating power. Those who seize this advantage could, rather than simply ignoring the market, leverage this dynamic to snag a lower home price to offset high mortgage rates.
Meanwhile, home sellers should size up the glut of homes on the market and, rather than price high and trim that number later, price their homes affordably right as they hit the multiple listing service—and catch a buyer’s eye from the get-go when their listing is fresh and in demand.
Hale also notes that today’s near comatose, tamped-down market isn’t necessarily a bad thing.
“This slower market pace is a return to what was normal before the [COVID-19] pandemic,” Hale says. “And buyers and sellers will need to keep this in mind when entering the housing market this spring.”
