Yahoo Finance ‘My phone started ringing off the hook’: Real estate agents report an unprecedented surge in calls from interested buyers post-Christmas. Is now a good time to buy?
Buyers are emerging with bright eyes and rosy cheeks from the winter holidays in the hopes of starting the new year with a new home — which could mean 2023’s frozen housing market is finally starting to thaw.
In December, the Federal Reserve set the table for several cuts to the key interest rate to take place over the next three years, with the aim of getting it down to the 2% to 2.25% margin in the long run. (However, the Fed chief Jerome Powell recently warned Americans the central bank needs more time before they’re confident enough to start slashing rates.)
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Corey Burr, senior vice president at TTR Sotheby’s International Realty, says the news didn’t shake the housing market straight away — even though mortgage rates typically follow changes in the federal funds rate — since the holiday season mayhem typically dampens any home buying activity. He didn’t expect too many calls from buyers until about the second week of January anyway.
“But literally, the day after Christmas, on the 26th of December, my phone started ringing off the hook,” he reveals. “I had never experienced that kind of volume in phone calls in my 36 years in the business.”
Many buyers are crawling out of the woodwork
While mortgage rates have now dipped to the mid-6% range, they’re a far cry from the 2% to 3% range from a few years ago.
However, buyers appear to have accepted this new reality.
Shay Stein, a Redfin Premier agent in Las Vegas, claims calls from clients in January were “nonstop.”
“I wouldn’t say buyers are happy about 6.5% rates, but they’ll accept it because they’ll feel vindicated if rates rise back to 8%, and they can always refinance and avoid future bidding wars if rates drop further,” Stein explains in a recent Redfin report.
The Mortgage Bankers Association also reports an uptick in purchase activity, rising to its highest level since last April. Adjustable rate mortgages — home loans that are tied to a certain benchmark and get reset periodically — are also increasing in their share of total applications.
“Many houses that had sat on the market for much of the second half of 2023, immediately went under contract around the first of the year, about three weeks ago,” Burr adds. “I've also seen some properties get multiple offers with escalation clauses, which we really weren't seeing in the last six months and 2023.”
In one instance, Burr was dealing with a property that had been languishing on the market for about six months. The asking price had been slashed three times from nearly $2 million down to roughly $1.67 million.
“And all of a sudden, over the Martin Luther King Monday holiday, we had three pre-offer inspections, two of those buyers ended up offering and the property is going to settle next week for $100,000 over asking price,” he says. “And that's an unheard of story to most Realtors.”
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Cold weather is freezing out buyers in other markets
While Burr is seeing increased activity in Washington, D.C., which is part of America’s South and is prone to warmer winter temperatures, other markets are reporting sluggish sales.
Redfin reports pending national home sales are down 8% year over year, the biggest decline in four months, even as asking prices climbed 6.5%, the biggest uptick in over a year.
“Real estate is usually slow in the Midwest in the winter, but this year it’s even slower than usual because the weather has been so extreme,” says Redfin Premier agent Christine Kooiker, who’s based in Grand Rapids, Michigan. “Casual house hunters are staying home to avoid the roads — but inventory is low enough that serious buyers are finding a way to see desirable homes.”
Still, Kooiker believes the Michigan market will thaw out as spring approaches and buyers try to avoid an escalation in prices. The real estate industry typically sees a surge in activity in the April and May months.
So, is now a good time to buy?
Burr believes it’s a good time for potential buyers to secure a home, especially with the recent decline in mortgage rates. He recommends they get all their ducks in a row and look into getting a pre-approval from a lender, which helps them stand out as serious, qualified buyers.
Since the market has cooled in recent months, he says buyers are more likely to get sellers to compromise on price or accept contingencies — but this will also depend on whether the property lingers on the market.
As for sellers, things are looking good too. “This long awaited recession that economists have been talking about for the last three years hasn't materialized yet,” Burr notes. “And so unless and until that happens, it's probably going to be a good time for sellers to sell their property.”
That said, he adds homeowners need to be mindful that they may get their initial asking price and so should be open to potential negotiations or meeting buyers halfway.
As for whether mortgage rates might drop in the future, Burr says it’s going to rest on the upcoming inflation and employment numbers — which have remained pretty steady since the past few months. The Fed met at the end of January and chose to keep the federal funds rate at 5.25% to 5.50%, and Powell admitted afterwards it was unlikely the central bank would be ready to announce any interest rate cuts during its next meeting in March.
While Americans may have to wait for rates to drop, Burr says when the cuts do come, it’s going to provide some much-needed relief for both buyers and sellers.
“Any kind of drop is just going to help the market recover from the — I'd say the worst market in the last 10 years, which happened last year,” Burr says.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
