Low inventory combined with pent-up homebuyers looking to make their dollars go further is already driving up competition this spring, real estate agents told Inman
The spring buying season won’t be nearly as chaotic as last year, but competition will make a comeback, according to a new report.
The report, released Thursday by the listings portal Zillow, features predictions by housing market experts that the low inventory of homes on the market, combined with homebuyers looking to make their dollars go further, would drive up competition for the best-priced homes during the busiest homebuying season of the year.
“Affordability will still be a challenge for many buyers this year, but sellers who price and market their home competitively shouldn’t have a problem finding a buyer,” Zillow Senior Economist Jeff Tucker said in a statement. “The slight drop in mortgage costs since October should revive demand after last fall’s slump, especially in more affordable markets and neighborhoods, but we are unlikely to see competition approach the fever pitch seen in the last two years.”
Rising mortgage rates pumped the brakes on the housing market during the second half of 2022 after it burned red-hot for two years. But as rates have fallen from their highs of 7 percent during the fall, the market has slowly started to come back to life in some areas. While sales are still well below what they were a year ago, they are rebounding significantly.
Currently, there are as few homes on the market as there were to start 2021 — a year that set records for housing scarcity. While 2023 does not have the ultra-low mortgage rates that fed the housing frenzy that year, low inventory combined with slowly decreasing mortgage rates will likely bring about heightened competition — especially in more affordable markets like Cincinnati and St. Louis.
The report predicts that while well-priced homes will sell without a hassle during the spring, many homes will require a price cut to get there. During January, 22 percent of homes on the market took a price cut, the largest amount since 2018, according to Zillow.
Alees Poulakis, an agent with Coldwell Banker Realty in northern New Jersey, is already seeing this play out ahead of the official start of spring. Upon visiting an open house for a $469,000 home with a client recently, she was surprised to find a line of 20 people out the door.
It was the first time she had seen such a crowded open house in months. Because of the low inventory of affordable homes in her market, she’s expecting it to happen more often in the months to come.
“I think we’re going to see it more and more,” she said. “It’s going to happen more and more because of the inventory levels.”
In the Dallas-Fort Worth area, RE/MAX DFW Associates agent Terry Hendricks is also seeing activity pick back up. Last week, two of his clients wanted to make offers on four properties in the Dallas suburbs but all four houses ended up receiving multiple offers — something he hasn’t seen in months.
“My clients were flabbergasted,” he said. “Several months ago these were the same homes that were potentially on the market for two or three months.”
Hendricks has witnessed more activity while representing sellers as well. One of his listings that has been on the market since November, received multiple offers over the past six weeks after going untouched for two months.
“I think it’s a testament to lower interest rates,” he said. “The properties that are priced right are selling and they are selling quickly.”