If you’re just going by news reports about interest rates, you might think that it’s all doom and gloom in today’s housing market. But there is a bright side for potential homebuyers: less competition. This often means lower home prices, and greater negotiating power.
How much has the market cooled?
It’s been a wild ride over the past two years or so, with home prices spiking 45% from pre-pandemic days to hit their peak this past May. But from July to September of this year, we saw consecutive monthly price drops, with the national median home price reduced by $11,560 from its May 2022 high. Redfin reports that in mid-October 2022, around 8% of home sellers had to drop their prices to entice buyers, up from 4% one year prior. In the local housing market, Fort Worth had a 28.8% decline in homes that sold for more than their list prices from September 2021 to September 2022, while in Dallas median home prices fell from $490,000 in May 2022 to $399,500 in September 2022.
What does this cooling mean for the homebuyer?
Buyers have more bargaining power. Gone are the days when sellers overwhelmingly had the clear advantage in transactions, sitting back while buyers scrapped it out in bidding wars — in which buyers often gave up on contingencies for fear of losing out. That’s now flipped; a recent Realtor.com survey found that within the past year a whopping 92% of home sellers “accepted some buyer-friendly terms.” Among 41% of these sellers, the terms included accepting appraisals, inspections, and financing options.
What contingencies are now on the table? And how important are they?
Lots and very. Home inspections, which often get waived in bidding wars, are one of the most important contingencies to insist on. And best with contingent language that any problems uncovered by a certified home inspector (which the buyer chooses) that the seller won’t resolve can terminate the contract. An appraisal contingency is equally important, making the purchase conditional on confirmation that the buyer is paying a fair market value price.
Then there’s the home sale contingency, which isn’t always in play during a seller’s market. But with a cooled-down market, buyers can negotiate time to sell the home they currently have, and have the option to withdraw the offer on the new home without losing a deposit in the event they can’t sell the current home.