In a matter of 2 months as mortgage interest rates rose alongside inflation, we began to experience a market shift. Keep in mind that this shift is taking us back to a NORMAL market. We all know that in the last two years, the housing market was nothing short of ridiculous with home price appreciation occurring weekly. It wasn’t unusual to contact a new home builder on one day and a few days later in the same week, the price of the same home I inquired about had already risen!
I recall speaking with sellers several weeks in advance of our last date and telling them that we would have to re-evaluate their list price again as soon as a couple of days BEFORE we went on the market. Sure enough, a similar home in their neighborhood would be listed before we would, quickly receive offers, and go under contract well above the listed price. That would cause us to increase our intended list price. We were “chasing the market up.” What always pleasantly surprised my seller clients was that even with the higher price, they ended up receiving multiple offers quickly, and realized a price well above their higher listed price.
Fast forward to where we are now and what we were lacking back then housing inventory has since increased. Home builders worked feverishly over the last several months to increase production. Homeowners decided to sell their homes and we had a large increase in inventory. It hasn’t been enough to meet buyer demand in North Texas, but it has allowed for more options for buyers. Then, the federal reserve board acted to fight inflation by raising the federal funding rate aggressively and repeatedly, and mortgage interest rates were finally impacted upwards by 2%.
While home prices are still up significantly from last year, they appear to be moderating, which is good news for buyers. Home builders have experienced high cancellation rates, adding to more housing inventory. Today’s strategy to set a listing price is not to look at recent comparable sales prices but instead, look at what’s currently on the market, how long it’s been on the market, and its competition. Then, to create energy and buyer interest, setting the price just below market levels. This is the same strategy we used successfully in similar markets. After all, buyers have more choices and with interest rates not expected to decrease significantly any time soon, price becomes more important to attracting buyers.
It's natural for home sellers to want to reap the same values their neighbors received in the Spring but pricing for that market sets up a home seller for lingering days on the market, price reductions, and eventually a lower sales price than if they entered the market competitively. Thankfully, data to support this is available to share with home sellers so we don’t make this grave mistake at the onset.