Listing inventory is finally returning to the white sand beaches of Destin, Florida. But perhaps not in the form the fishing hotspot’s real estate agents would prefer.
With mortgage rates marching toward 7% and home prices still higher than they were this time last year, homes simply aren’t selling as quickly as they used to (or selling at all). Inventory is getting stale, and you won’t find a lot of new entrants.
More and more sellers are only listing their homes because they absolutely have to, said Jordan Dennis, a Century 21 agent in Florida’s panhandle.
As anxiety sets in among prospective sellers and agents, the number of new listings hitting the market has sunk to new lows. During the four-week period ending September 18, the number of new listings across the country was down 20% from a year ago, according to Redfin. It’s the largest yearly decline since May 2020, when lockdowns froze the housing market in place.
With sellers there is a feeling of being late to the party and that the conditions are unfair, and they wish they should have made the decision to list earlier.
Mike Wood, a re/max agent in reno, Nevada
To boot, the inventory of existing homes for sales dropped 1.5% in August from the prior month to 1.28 million homes, according to the latest report from the National Association of Realtors.
“The plunge in new listings is hindering growth in housing supply, which is keeping home prices relatively high even though the market is slowing down,” Taylor Marr, Redfin’s deputy chief economist, said in a statement. Housing supply would normally rise during a downturn, Marr noted.
FOMO (fear of missing out) and cheap debt, which drove record activity during the boom years, has been replaced by FOBATT (fear of buying at the top) and expensive financing, which has paralyzed the housing market.
“With sellers there is a feeling of being late to the party and that the conditions are unfair, and they wish they should have made the decision to list earlier,” said Mike Wood, a Reno, Nevada-based RE/MAX agent.
“Many sellers are reluctant to sell because they don’t know where they are going to move,” said Michael Nourmand, the president of brokerage Nourmand & Associates. “In addition, their annual property tax would increase if they buy a more expensive home and they’ve locked in a low interest rate so their monthly payments will increase with their new loan.”
Roughly 85% of U.S. homeowners with mortgages have a mortgage interest rate below the current level of 6%. And more than two-thirds have a mortgage under 5%.
I’ve been telling sellers to be prepared to not even see anything – if we are lucky – until 14 days.
Megan Lowe, a Reno-based Chase International Real Estate agent
With the Federal Reserve increasing the federal funds rate by 75 basis points this week and additional future hikes forecasted, mortgage rates are expected to continue rising, potentially into the 7% range. Homeowners will be further disincentivized from selling, and the purchasing power of buyers will erode further.
In such a brutal environment, sell-side agents say the key to successfully handling a listing is managing seller expectations.
“You have to be really transparent and show them the numbers and show them how much it has changed,” Megan Lowe, a Reno-based Chase International Real Estate agent, said. “I’ve been telling sellers to be prepared to not even see anything – if we are lucky – until 14 days. As far as seeing an offer, it has been consistently within that 14 to 18 day time frame. But we aren’t getting 20 showings on the first day anymore, at most we are seeing four or five showings within a week or so.”
If my sellers are willing, I am recommending that they come in on the lower end of what has been sold in the past three months.
Christina Ward, a Boise, Idaho-based Keller Williams agent
For Dennis, these longer time horizons have meant listing properties much sooner than he would have previously.
“Less than a year ago you could put a listing up and the next day it would be under agreement, but now things are slower, and we are listing way ahead of schedule,” he said.
As always, pricing is key. Sellers who witnessed neighbors selling homes for top dollar in recent years are reluctant to list at a discount, even if the market has turned, agents said.
“If my sellers are willing, I am recommending that they come in on the lower end of what has been sold in the past three months and then also looking at what is on the market now and pricing accordingly,” said Christina Ward, a Boise, Idaho-based Keller Williams agent. “We are still in an appreciating market, it is just appreciating slower than last year.”
Despite the market slowdown, agents said that it is still a decent time to list. That messaging to prospective sellers is important.
“There is a fear that the market is going to crash and that isn’t the case. What is happening is that everything is becoming normal again,” Dennis said. “It reminds me of how it was five years ago. There is inventory and there is no lack of buyers, agents just need to go out and find them.”
Los Angeles-based Nourmand added: “Agents need to spend more time prospecting. For most seasoned agents, this means spending more time working your sphere of influence. For newer agents, this equates to putting in more hours doing things like sitting open houses, door knocking, and cold calling.”