What Home Shoppers Should Know About A Softening Market

Over the past several years, tight inventory and increased demand for single-family homes has created a real estate market that strongly favors sellers, with homes selling for high prices and new construction failing to keep up with the demand. However, real estate experts have been predicting that the housing market is likely to turn soon - in the buyers’ favor. Rising mortgage rates alongside housing prices have been nudging home ownership out of reach for many renters who otherwise would want to buy. However, as the prices cause demand to decrease, there’s likely to be a stabilization and correction of the market, whether that occurs in 2018 or later. For home shoppers, the significance of that correction will vary based on several factors. Here, SetSchedule CEO and real estate investor Roy Dekel explains what home shoppers should know about a softening housing market. Luxury and high-end homes will be among the first affected. The same way that “McMansions” became a casualty of the 2008-2012 recession, luxury homes will most likely see the impacts of a downward trending market first. “Anything over a million dollars, historically, will start to be stagnant sooner, as those with more expensive tastes become more reluctant to make offers,” Mr. Dekel said. Homeowners who are over-leveraged in their homes, who don’t have much or any more value in their homes than the mortgage principal due, will in turn be the first ones to feel an adverse effect from a softening market. If they can’t sell the home for what they owe, it will make it difficult or impossible for them to move up to a larger home, which causes the pool of potential buyers to shrink for luxury homes. From there, Mr. Dekel said the trend will continue downward to the smaller or lower-valued homes as well. Houses will also begin taking longer to sell. A downward trend will result in houses remaining on the market for longer periods, as homeowners realize that the purported value of their home based on the trends is no longer appealing to buyers. Whether the prices have finally hit a ceiling that make housing unaffordable for many buyers, or potential buyers become discouraged and decide to continue renting in the short term, peak and demand for homes will eventually lead to a “plateau” of sorts, during which buyers will find that it more difficult to sell their homes. Although the change in demand may be alarming to homeowners who are looking to sell, Mr. Dekel said that the tools to sell your home quickly, and to get the most value from it, are still the same. “The key is to make your home as appealing as possible,” he said. “Set your expectations and be realistic, knowing that if you’re in a buyer’s market, you need to be more appealing to buyer.” That means ensuring that your home is in good condition, cosmetically and structurally, and that its price is fair for the market, rather than what a homeowner wants. “You want to price a little on the lower side to drive interest,” Mr. Dekel said. “If you truly want to sell, you have to price accordingly, but if you keep getting broker valuations that aren’t as much as you want, then the amount that you want might not be the right amount.” A softening market is good news for buyers, particularly first-timers. If you’re a buyer, you’re on the winning side if the market begins to trend downward, Mr. Dekel said. Lower selling prices, combined with less competition from homeowners who no longer want to move due to the declining value of their current property, make it an ideal time to make a purchase. “If you haven’t bought before, this is your chance, especially if you’re going to stay in that house for five years or more, because you will be in it long enough for another cycle,” he said. Even if home prices continue to decline, the market is likely to stabilize again so that the buyer can recoup the value of their home by the time they’re ready to sell. The key for both buyers and sellers will be to find a knowledgeable real estate agent who is familiar with the market trends and can help advise you on the best way to proceed. “In a buyer’s market, that’s where the good Realtors shine,” Mr. Dekel said. “Especially if you’re selling, you really want a Realtor that doesn’t do it part-time, or as a hobby. You need the realtor that has the budget and the muscle to promote your home.”