DALLAS — Are you stuck on the homebuyer elevator, trying desperately to go down? In the first half of last year, prices just kept going up. And then by the time they started to go down, we were riding a swift surge in mortgage rates.
Finally, at the beginning of this year, the elevator stopped going up – home prices and mortgage rates both reversed course and dropped.
But that break for homebuyers didn’t last long. Real estate broker Joe Atkins, of Joe Atkins Realty, explains, “It feels like last spring”.
Atkins says current conditions remind him of the full on frenzy for homes and the bidding wars that catapulted home prices in the first half of 2022.
“We have an agent here in our office who had a half-million-dollar listing, I think somewhere in east Plano," Atkins said. "They got eleven offers. The one they took was 10% over asking price. They had 75 showings scheduled from Thursday night to Sunday when they listed it."
Low inventory continues
Just like last year, the driver of this is low inventory. Six months’ worth of houses for sale is considered a healthy market. In Texas, inventory was recently at less than a three-month supply.
Some metropolitan areas had even less than that. And Atkins says some micro markets had far less.
“Frisco is at 1.4 months of inventory, Plano is at 1.5. Dallas County is at 1.8," Atkins said. "So, the takeaway from that is there's still not very much inventory.”
That's because if someone is in a home already but they are thinking of selling, they are likely to ponder how much higher the interest rate might be compared to the mortgage rate they are paying on their current home. At that point, Atkins says any thoughts of moving might quickly fade.
"If you got a 2% or 3% rate, it's going to take something drastic to probably make you move," Atkins said. "Therefore, we're not seeing an influx of inventory,"
Atkins says that continued advantage for sellers means it can still be difficult for buyers to negotiate.
“Something that we thought would probably go away was, you know, all the crazy offers going over asking (and) the appraisal waivers…waiving this…waiving that, and…I can tell you it's still there," Atkins said. "Every property I've put on the market since…April…we've all gotten either multiple offers asking (price) or above on them.”
And he adds, there are plenty of buyers in the market who are ready and willing to pay with cash.
“Cash is still king," Atkins said. "We are still seeing cash deals – actually probably seeing more cash deals because…your cash going into real estate means a lot more when the (mortgage) rates are higher than it did when rates were lower.”
In other words, some buyers may be willing to part with a large chunk of cash for a property rather than financing it at higher interest rates.
Of course, buyers should be wary about competition pressuring them to spend beyond their budgets, leaving them with buyer's remorse later. But Atkins says you also don't want the other buyer's remorse, where you find the right home but don't get it because you don't put your best offer forward.
“Over the last two years, I can promise you, one out of four people that have lost out on something will probably tell you that they probably had remorse: Maybe I should have done XYZ to make my offer more attractive," Atkins said.
Freddie Mac has a helpful homebuying budget calculator. Fannie Mae offers a mortgage calculator an affordability calculator, and a whole checklist for homebuyers.