There’s a Chinese proverb that translates to the effect of, “the best time to plant a tree was 20 years ago. The second best time is now.” This sentiment applies to buying real estate as well. There are a handful of indicators in the market right now specifically that make this a more favorable time for buyers than we’ve seen in a while.

This is not to say exactly that we are in a buyer’s market. Technically, that is typically determined when there is three or more months’ supply of inventory at any given time. We’re not quite there yet (there were 1310 active listings as of August 1, which comes to a roughly 2.4 months’ supply), but there are other factors that impact your power as a buyer.

The market has been volatile for much of the year. When the Fed hiked rates — drastically — in the spring, it created ripples throughout the economy. Mortgage rates also rose, inflation ballooned, and the stock market took a dip, all impacting buying power. Now, however, things are changing once again, and these changes may benefit you as a buyer.

1. Improved inflation forecast

Here’s the first bit of good news: The rate hikes appear to be working. The Fed increased rates to put the brakes on some runaway inflation numbers. The Federal Reserve Bank of New York's Center for Microeconomic Data released the July 2022 Survey of Consumer Expectations, which shows substantial declines in short-, medium- and longer-term inflation expectations across multiple sectors, including gas, food, and home prices, and households' income growth expectations improved. The Fed has announced further rate hikes are still necessary, but hopefully they will only further help to dampen inflation.

2. The market is rebounding

While hardly a sprint, the markets have been regaining some of their losses over the past couple months, after hitting lows in mid-June. For buyers reliant on their stock portfolios for down payments, this increases their buying power.

3. Mortgage rates are stabilizing and even declining

Last week mortgage rates briefly dipped below 5% for the first time since April. They’ve crept back up, but they’re still lower than the 5.81% they hit in June. While these rates are a significant jump from the historically low rates we experienced in recent years, they are hardly unprecedented. They are currently on par with what they were around 2008-2009, and significantly lower than they were before that. And if you want some serious sticker shock, consider that in 1981 the annual average was 16.61%!

4. Buyer demand is down

As noted above, increased rates, a down market, and rising inflation (not to mention world events) caused many buyers to pull back. When money was cheap (i.e., interest rates were low) and the stock market was booming, more people have the wherewithal to jump into the market, and this created a lot of competition. This in turn put some pretty intense upward pressure on prices. Decreased demand creates a stack of advantages for buyers in the market, each compelling in their own way.

5. Price reductions are becoming more frequent

With less demand, sellers may be more willing — or forced — to accept a lower price if they’re motivated to sell a property. As you can see in our current market report, May, June, and July of this year saw 272, 316, and 288 price reductions, compared to 180, 156, and 164 during the same months last year. Price reductions are generally a good indicator of a cooling market.

6. Inventory is increasing

With fewer buyers coming to the table, properties are sitting on the market longer. Meanwhile, new properties continue to come up. As noted above, there were 1310 active listings on August 1, whereas last year at the same time there were fewer than a thousand. If typical patterns persist, as we enter the fall, we should see a marked uptick in new listings; September is typically the month with the most new listings. Increase in supply combined with a decrease in demand makes for less competition.

7. Multiple offers are becoming less common

In a hot market, desirable properties might get several or even dozens of offers, which in turn often results in counters and higher bids. Again, with fewer prospective buyers vying for properties, many properties are receiving fewer offers. If your offer is the only one or one of just a few, it has a better shot of being accepted.

8. Overbidding is declining

With fewer people making offers, there’s less incentive to overbid to make offers more attractive. In July, 57% of sales closed over final list price, down from 73% in April. When you combine this with price reductions, it makes for more favorable conditions for buyers.

9. Contingencies are more acceptable

When the market was at its most competitive, buyers would go to great lengths to make their offers as appealing as possible. Bidding high was of course the primary strategy, but it was also common to waive all contingencies and submit what’s known as a clean offer. The most common contingencies are financing, appraisal, and inspection. Waiving contingencies makes your offer more attractive to sellers, but presents risks to you as the buyer. With less competition, you may be able to keep some contingencies and still get an offer accepted, giving you more protection.

All of these factors are highly fungible, and there’s no knowing how long any of them will continue. If you want to take advantage of the current market conditions and try your hand at buying, contact us, and we’ll get you started right away.