With interest rates on the rise due to inflation and another hike expected after June’s record inflation numbers, the housing market is feeling the effects of a necessary cooldown. However, sellers eager to still make top dollar on their homes are being warned as a result that they may need to be more realistic about what they hope to get from the sale of their property.
“Sellers have to be more realistic,” Bill Kowalczuk, a real estate broker at Coldwell Banker Warburg, told CNBC.
Kowalczuk warned that with the higher interest rates from the Fed, sellers should be more aware that the days of multiple competing offers and bidding wars sending selling prices as high as 30% over the asking price are “gone,” and that if a seller prices too aggressively, they aren’t likely to sell. As such, the home would sit on the market longer, which could lead buyers to believe something is wrong with it—forcing it to sit even longer.
He advises sellers to have more flexibility when it comes to the price they accept, which should still be higher since the average price of a home is still higher than before the pandemic.
“Every offer is a good offer and it’s a potential buyer,” he said. “You should be willing to negotiate on the price, as long as the buyer has been pre-approved for a mortgage.”
A new analysis from Redfin also found that some markets are cooling faster than the rest, specifically on the West Coast. The five that have cooled the fastest are San Jose, Sacramento, Oakland and Stockton, California, as well as Seattle. The five markets that are cooling, but at the slowest, are Albany and Rochester, New York, El Paso, Texas, Bridgeport, Connecticut and Lake County, Illinois.
Buyers are also being warned about the market, however, because while those who can afford to buy will face less competition and potentially reduced prices, the expected increase in mortgage rates will force other buyers out of the market, as affordability declines.