It was noticeable back in early May. It was a subtle shift in the housing market. Home buyers were pulling back. Fewer groups of potential buyers were going to Open Houses to look for their next home.
As we enter the second-half of 2022, we are seeing a new breed of home buyers emerge. And the tide is turning for home sellers.
As The Tide Turns
The steady rise in the average 30-year mortgage rate since the beginning of the year from 3.2% to well above 5.0% is having an impact on the housing market, especially for first-time home buyers. For these would-be buyers who were not around in the 1980’s to experience double-digit mortgage rates, the current average 30-year mortgage rate is nothing less than “sticker-shock”. For many, their purchasing power has been dramatically and abruptly eroded.
Buyers, who began their home search journey as early as January 2022 and lost out on homes due to multiple competing offers, are now re-writing the play book. No longer can many first-time home buyers afford to pay upwards of 10% over the asking price, as well as limit home inspection requests. In some instances, the asking price itself is simply out of reach among this new breed of buyers.
The New Breed of Home Buyers
Home buyers are now re-balancing their priorities. It’s as if they laid out all their wish-list items and are methodically sifting through each one to see what’s truly important to them in their next home. Here in Northern New Jersey, I am working closely with my buyers to have them re-examine their top 3 factors in determining whether a home is right for them. Location and proximity to train/bus route into New York City remains a top priority. We are also digging deep into what “move-in ready” means to them. A kitchen that is 10 years old may have been an immediate turn-off for some of my buyers who have been seeking that elusive white designer kitchen. Now, that same kitchen is looking more appealing as buyers re-balance their priorities. Similarly, a buyer’s immutable requirement to have a house with 4 bedrooms may give way to 3 bedrooms if the house has a large Family Room, for example. Buyers are adjusting their expectations to align with their level of home purchase affordability. *
Sellers would be wise to not underestimate this new breed of buyers. They are well-educated about the housing market and have done extensive homework about properties that have sold in the neighborhood. These buyers are becoming hyper-selective. Not just any house will do. So what does this mean for home sellers?
The Tide is Turning for Sellers
Going into the second-half of 2022, sellers can expect a growing number of buyers to be more cautious about making an offer on a home. Sellers need to be cognizant about the importance of delivering value. Gone are the days of frenzied home buying that we’ve seen over the prior months. Sellers need to align their mindset with the new breed of buyers.
Here is a recent example. A house in one of the top-tier towns in New Jersey in close proximity to NYC had been sitting on the market for 29 days. From my perspective, this home was ripe for a price reduction. Together, my buyers and I developed a home buying strategy for this home and offered less than the asking price. With no other offer on the table, the seller presented to us a counter-offer of 11% above the asking price! My buyers chose to walk away and pursue another property instead. Clearly, the seller was trying to resurrect the glory days when almost every house was attracting offers within days of being listed for sale. Not surprising, this house is still on the market.
Delivering Value: The Condition of Your Home
For buyers to be motivated to make an offer on a home, there needs to be perceived value. And the value that a home buyer places on a particular property will vary from buyer to buyer. For example. A home with a large backyard may appeal to a buyer who has a dog, while another buyer may find a large backyard requires too much maintenance. The seller, of course, can’t change the size of the backyard. However, a home seller can change the overall condition of the home. And this is where the seller has the opportunity to deliver value and widen the home’s appeal among today’s buyers.
The condition of the home matters as buyers become increasingly choosy. Although inventory remains relatively low, sellers are now finding themselves competing with other properties on the market. Sellers need to be sure their home stands out. The more move-in ready a home can be showcased, the more likely it will capture buyer attention. Many buyers simply don’t have the time or desire to “take on a project” if they feel the home needs work.
Perhaps the easiest and least costly way to refresh and update a home is to remove dated wallpaper and paint the interior. And if floors have been covered in carpeting for several years, eco-conscious buyers will appreciate having old carpeting removed. Sellers may want to reach out to a home stager and their realtor for specific home improvement recommendations.
Just like we see on HGTV, home makeovers are an immediate way to generate buyer interest in a home. Many buyers will pay a premium for your home if it has been freshly renovated. However, what if you agree that your home needs some major updating, but you do not have the money to make this happen? Let me share some good news.
There is a program that will allow you to invest in your home’s potential and maximize the value of your home. At Compass, we call this program “Compass Concierge“. Briefly, this exclusive program is a hassle-free way to help you with home improvement services (including home staging) with zero upfront costs and no interest. The money that is provided to you upfront when you are preparing your home for market is simply paid back when you close on your home. The return on your financial investment can be significant, resulting in a faster sale for a higher price, than if your house was sold in “as-is” condition. For more details about this unique and timely program, reach out to me at my contact information below.
Delivering Value: The List Price of Your Home
For buyers, value is comprised of not just the condition of the home, but the list price as well. If a home is priced too high, the seller runs the risk of languishing on the market without any viable offers. The new breed of home buyers in this changing market will not chase an unrealistic list price.
And as the Days on Market (DOM) increase, the perceived value of the home decreases. Essentially, “the blush is off the rose” and the buyer’s potential excitement is gone. The seller is now fighting against the clock and negotiating downward from the list price.
The more desirable position for the seller to be in, of course, is to be negotiating upwardwith a buyer. How do you do this, you might be wondering?
This is where the expertise of your realtor matters most. The right listing price will set the seller up for success. There is no exact science, however, in determining the list price. There are many factors that can impact the home buyer’s purchase decision that no one has control over. For example. A house down the street from you suddenly comes onto the market and it is at a lower price, in better condition, and has more bells and whistles. The goal is to be that exciting new property when you come onto the market (in a specific price category) and then fine-tune your strategy as external conditions change.
Today’s housing trend requires marketing with a greater emphasis on delivering value. Therefore, crafting a well-conceived pricing strategy is of fundamental importance. While there is plenty of housing data available, that information primarily serves as a general “ball park” figure for the listing price. However, finding the “nuances” in the market is the goldand one of the things I do best. It is the key to determining a strategic and compelling listing price for selling your home.
For motivated sellers looking to safeguard their largest financial asset and optimize its potential value in 2022, align your mindset with the buyers. Take steps to enhance your home’s overall appeal and “move-in” readiness. Choose a listing price with laser-like precision. By delivering value to the new breed of home buyers, you can attract top dollar for your home!
Let’s Move Forward
For greater insights as to how to successfully navigate the 2nd-half of the 2022 housing market, reach out to me at 908-239-9261 or [email protected] Whether you are house hunting or selling in New Jersey or in another state, I can help you. Additionally, when appropriate, I can collaborate with my Compass colleagues located in over 300 cities across the U.S.
* Recommend home buyers meet with their mortgage lender early in the home buying process to determine what mortgage rate scenario best applies to their individual financial situation (credit score, loan amount, etc.) and re-evaluate as conditions change. ~S. Minken
Did you miss my article in May? Here is the link: The 2022 Real Estate Market is Shifting! Here’s What You Need to Know – Suzy Minken
My Bird’s-eye View
The Tide is Turning for Home Sellers: Changes You Need to Make Now for the 2nd-Half of 2022