Home prices are at record highs and still rising, but there are some early indications that the market may be starting to cool. For sellers looking to get top dollar for their home, the time to sell is now.
But homeowners are still holding back from listing their homes, said Jeff Tucker, senior economist at Zillow. While the inventory of homes for sale has ticked up this spring, he said it has more to do with buyers retreating than a flood of new homes hitting the market.
“Sellers don’t seem to be particularly incentivized by these higher prices, or even about how April and May is the best time to list the house for a quick sale that gets a high price premium,” Tucker said.
The main reason that homeowners aren’t flocking to the market to cash in, he said, is simply because they still need a place to live. “They worry, quite reasonably, that they would need to pay a lot to find another place as good or better.”
Many would-be sellers are waiting for the right moment to strike, said Tracey Murray Kupferberg, an agent with Douglas Elliman in Long Island, New York.
“A lot of people are saying, ‘Am I making a mistake in waiting because I’m never going to get that dream price again?’ There is this fear they might miss the peak,” Kupferberg said.
But there is reason to believe that peak could be now.
Signs the market is cooling
It is impossible to time the market exactly, but many analysts expect home prices to peak this quarter.
“It is likely the pace of price appreciation will peak some time this quarter, either in April, May or June,” said Tucker. “That will be the high water mark for annual pace of appreciation, then it will decelerate.”
Signs that the market will start to cool can be found across the market. Mortgage rates, which have increased at the fastest rate in decades this year, are now over 5% and are expected to keep rising. The more expensive it is to finance a home, the less purchasing power buyers have and many give up if they can’t afford a house that fits their needs. That, in turn, can lead to less competition and some price easing.
In addition, there’s been a five consecutive months of declines in pending home sales, as well as a drop in newly constructed single-family sales, according to the National Association of Realtors. That means fewer people have been willing or able to buy. And the share of listed homes with price cuts has been increasing over the past two months, according to Realtor.com.
The average profits made on selling a median-priced single-family home dipped in the first quarter, according to Attom, a real estate data company. While profit margins often decrease during the slower winter months, the latest dip marked the first quarterly decline since the fourth quarter of 2019 and the largest since the first quarter of 2011.
“Some sellers really made out over the past two years,” said Kupferberg. “Some buyers did, too. It was a win-win then, with rising prices and really low mortgage rates. Now it is different.”
She said sellers can often be slow to recalibrate after the market shifts, still expecting their home will sell in days with manic bidding wars.
“Prices are going to top out,” she said. “Then it takes a while for sellers to realize they have to lower their price. This pool of buyers can’t afford the home because the cost of borrowing has gone up.”
In need of a quick sale
Lotte Vonk was on the fence about selling her home, mostly because she wasn’t sure where her family would go.
Vonk knew that when her second child arrives in a few months, space in her suburban Chicago townhome would get tighter. But she couldn’t find many homes on the market that seemed to be a good fit, plus home prices and mortgage rates just kept rising. Still, like many would-be sellers, she knew that if she and her husband didn’t sell soon, they’d miss getting the highest price for their home.
“We were very aware of the rising interest rates,” she said. “We were thinking we should sell this house and buy now, or renovate so we can stay.”
Even as they considered expanding the three-bedroom townhouse where they live with their toddler, a dog and cat, they still eyed new listings on the market.
Earlier this month they found the perfect five-bedroom house in a nearby suburb. Once their bid was accepted, they raced to put their home on the market in a week. They couldn’t afford carrying both homes, so the offer to buy the new home was contingent on the sale of their current home by mid-May.
They listed their home for $315,000 last week and have already had more than 20 viewings, but no viable offers.
“Everything I know about the market has told me that the houses should be flying off the shelves,” said Vonk. “When things are not selling it is either the price or the product. It was a gut rehab a few years ago, I know it isn’t the product. So it must be the price.”
They are going to reduce the price and see if that brings in a buyer in time.
“I don’t want to lose out on the house I love,” Vonk said. But she added that she’s willing to sell her home for a little less than her dream price, just to be able to buy her next home.
Staying put, for now
When Kupferberg, the agent in Long Island, visited a potential seller’s home recently she told the owners it would sell fast, even if it did need a little work.
The three-level home with five bedrooms, a pool, and a tennis court was becoming too much to manage for the empty-nesters and Kupferberg knew it would be appealing to buyers willing to pay top dollar.
Still, the couple wavered on the decision to sell or stay put.
“They don’t want to miss the mark, they know their house would sell right away,” said. “But if they take the leap right now, where will they live?”
Kupferberg said she doesn’t have easy answers. Many of her would-be clients are homeowners with a large home who would like to downsize, but also want to stay in the community near their grown children or grandchildren, where their church or synagogue is, close enough to go to the same doctor. There aren’t many options.
“I don’t know what to tell people who want to sell but don’t have anywhere to go,” she said. “Unless they have another home or have a relative to stay with so they can benefit from what we’re seeing at the tail end of the selling market.”
Kupferberg said this particular couple was looking for a single-floor home in a vibrant, upscale gated community, but there were few options and not immediately appealing to them.
“There is nothing that is really meeting their needs,” she said. “They have nowhere to go if they sell, so for now they are staying put.”