In this month’s market report, we ask in-house economist Jeff Tucker about what seasonal cycles look like in a remarkably unusual year for home buying.
If you’ve come up empty-handed after home shopping all spring and summer, you might want to keep your eyes peeled over the next few weeks.
As summer wraps up, there could be some deals in the offing, says Zillow® senior economist Jeff Tucker.
“I’d encourage buyers who felt daunted or got outbid during the surprisingly stiff competition this spring to keep an eye on Zillow for good options this August and September,’’ Tucker says. “It’s really a sweet spot in which they’ll face less competition from other buyers while still having enough options to help them find the perfect fit.”
Here’s why.
Real estate tends to follow seasonal cycles: Spring brings out buyers in droves while fall tends to see price cuts and longer selling times as buyers drop off when their kids go back to school. Tucker says those long-standing trends have gotten even more pronounced over the past two years.
“The seasonality of the housing market seemed to be amplified in 2021 and 2022,” he says. “In both years, a white-hot spring shopping season gave way to a surprisingly slack late-summer slump, allowing buyers to benefit from still-high inventory and less competition.”
“I’d encourage buyers who felt daunted or got outbid during the surprisingly stiff competition this spring to keep an eye on Zillow for good options this August and September,’’ – Jeff Tucker, Zillow senior economist
Tucker says summer 2022 felt like someone abruptly hit the brakes after having the pedal to the metal for several months in the spring. After this spring’s surprisingly hot market, there’s reason to believe this fall could see a similar slowdown that would present new opportunities for you.
Here are three things you should know about the market in the coming months:
1. You may have more negotiating power
Many sellers didn’t manage to get their homes in shape in time to sell in the spring, or they listed in the summer without realizing that buyer demand wanes after the half-year mark. Now, some of these homeowners are finding their homes won’t sell for asking price and they’re taking longer to sell, Tucker says.
In July, 22% of listings had price cuts, a slight uptick from the previous month, according to a Zillow analysis. This trend is expected to continue through the fall months.
Homes have also been staying on the market longer before going under contract — 12 days in July compared to 11 days in June and 10 in April and May. And the volume of newly pending sales has slowed, falling about 6.5% from June to July.
And although home values are still climbing, the pace of growth is slowing. The typical U.S. home value — currently at about $350,000 — grew 1.4% from April to May. Two months later, from June to July, growth slowed to 0.9%.
“Buyers looking for a deal should keep their eyes peeled for listings with price cuts, as well as those that have been on the market for more than a full week,’’ Tucker says.
For tips on how to find a bargain-priced home, read 9 Tips for Finding a Bargain-Priced Home.
“Buyers looking for a deal should keep their eyes peeled for listings with price cuts, as well as those that have been on the market for more than a full week.”
2. Mortgage interest rates have become less volatile
After bouncing around earlier this year, mortgage rates have become less volatile, Tucker says. Rates on 30-year fixed-rate mortgages stayed between 6.67% and 6.96% for all of June and July, according to data from Freddie Mac. On a $280,000 mortgage, the difference amounts to $54 in monthly principal and interest ($1,801 versus $1,855).
“That’s not nothing,” Tucker says, “but it is actually less volatile than movements earlier this year, and certainly compared to last year’s increase of multiple full percentage points.”
Tucker advises buyers to get pre-approved and stay current with mortgage rates so they understand how their budget might change. But he notes that interest rates aren’t affecting whether fall is a good time to buy.
“If this turns out to be the peak for interest rates before a long decline, then buyers can refinance later to a lower rate,’’ he says. “And they’ll benefit from having bought at a time when higher rates discouraged some competing buyers. If this turns out to be a plateau on the way to even higher rates, then buyers will be even happier to have locked in today’s rates.”
“If this turns out to be a plateau on the way to even higher rates, then buyers will be even happier to have locked in today’s rates.”
3. The market will slow further in late fall, even as more homeowners think about selling
Come October/early November, the market is expected to slow even more. While this means less competition from other buyers, it also means even fewer homes to choose from since sellers typically wait until after the new year to list their homes, Tucker says.
For-sale listings will likely be in short supply for at least the rest of the year, even though recent Zillow research indicates that a growing number of homeowners have selling on their mind. A Zillow survey found that 23% of homeowners are considering selling their home in the next three years or have currently listed their home for sale. That’s a significant increase of 8 percentage points from last year. Of those, 4 in 10 homeowners say they are considering selling in the next year.
If these hopeful sellers follow through, it could improve the picture for buyers. For now, though, homeowners are staying put. New listings of existing homes hit a new seasonal low in July. Only about 336,000 homes hit the market that month, 26% fewer than a year earlier and about what you would expect to see in a typical January.
SOURCE: Zillow
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Despite those numbers, it’s still possible to work with an agent such as myself to take advantage of that sweet spot to find a deal. At this time of year, the drop-off in demand from competing buyers is steep enough to outweigh the lack of new listings. Determined buyers who know what they want will find they’ve got a lot more elbow room at open houses, and more leverage at the negotiating table this fall.
If you have questions about what’s happening with home prices in our local area, let’s connect. To set up a FREE CONSULTATION, or to answer all your Real Estate questions, reach out to me anytime. Contact Debbie at 703.220.1600 / [email protected].
