You and I know you don’t have to look deep to find evidence to support a feeling, and I certainly did not look below the evidence at my fingertips. The evidence is slim, but change doesn’t always begin with a big bang, or end with an eruption. Cracks and fissures are the common indicators that something is happening below the surface. I’ll tell you why I think this slight evidence may be a first sign.
First, interest rates are a half percent lower than last year, yet time on the market is up and sale prices as a percentage of the asking prices is flat and down compared to last year. (I don’t believe interest rates are as big a difference maker as purported. Inventory is the biggest driver in sales and when most home owners have 3% or lower mortgage interest rates, they’re not likely to sell to move to an interest rate twice what they have.) If declining interest rates bring buyers into the market, then we should see an increase in competing offers, a decrease in time on the market, and an increase in sales price over asking price. None of these are happening.
Second, at 21 days on the market, home sellers are likely to make a price change. Owners who see offers in the first 7 days on the market are likely to have multiple offers to choose from. The terms are more likely very attractive, and the prices often exceed the asking price. At 21 days and beyond, if the owner has made a price reduction, the sale price may be close to the asking price, but the terms are not going to be as generous. Competition drives price and terms. Buyers are not finding themselves competing today.
Third, competing offers are most likely in the first week that a house is on the market. When the time on the market increases, a drop in competing offers is expected. Time on the market is up, and competing offers are down.
The spring market is a different animal compared to the fall market. I could be wrong about the market shifting, I’ve been wrong before. I remain cautiously optimistic for home sellers. While I don’t think prices are going to decline, it may be possible for some buyers to have opportunities to buy without competition.