Advice for home buyers in today's housing market

For the first 4-5 months of 2023, it looked like the home market would still be pretty competitive for home buyers. Year-over-year home prices were flattening, but the inventory of homes for sale was remaining tight. Mortgage rates continued to remain high, bouncing between 6-7%. With prices remaining high and mortgage rates through the roof, unaffordability remains a big issue for most buyers. 

According to Core Logic, home prices nationwide, including distressed sales, increased year over year by 2% in April 2023 compared with April 2022. On a month-over-month basis, home prices increased by 1.2% in April 2023 compared with March 2023. And the forecast is that from April 2023 to April 2024, there will be an increase of 4.6%. So, we are not going to see any panic selling and as usual, the nuances occur at the specific locational level.

So let's peek at the locational level to see what's going on. Per Case-Shiller, buyers in Miami (this past April) saw the local market post the largest gain of 5.2% year over year, whereas buyers in Phoenix saw a -6.1% year over year drop. Other locations dropping were popular West Coast cities that had formerly seen skyrocketing prices, like Seattle (-12.4%) and San Francisco (-11.1%), which are now seeing double-digit year-over-year declines. Las Vegas (-6.6%), San Diego (-5.6%), Portland (-5.2%), Denver (-4.5%), and Dallas (-2.9%) also are in the batch that saw drops.

Things have been tough, and this CNBC article warned that things are about to get even harder for buyers. Here's why:

• In the last week of June, the number of homes for sale fell below year-ago levels for the first time in 59 weeks.
• New listings in the last week of June were down 29% from the same week a year ago.
• Mortgage rates recently jumped back over 7%.

So while we know the advice needs to be offered for a specific location, here are two suggestions from LendingTree along with some additional thoughts for today's home buyers.

1. Don't be afraid to negotiate.
2. Understand you may not get your perfect deal.

LendingTree's Senior Economist, Jacob Channel, suggests buyers look to negotiate more:

"Today’s housing market is tough, but sellers are nonetheless more willing to negotiate with buyers than over the past two years. In the same way that asking your lender for a lower rate can help you save money, so too can asking a seller to cover things like closing costs or to pay for repairs."

LendingTree reports that overall, 63% of buyers said that they tried negotiating on the price of the home, that 38% of buyers negotiated on the seller covering a portion of closing costs, and 36% asked for the seller tp cover repairs. While many understand they can negotiate with the seller, not all realize the opportunity to negotiate a lower APR. LendingTree provides this example:

Using a $350,000 30-year fixed-rate mortgage with a 6.50% APR as an example, a quarter-point reduction to 6.25% could save you:

• $57 a month
• $684 a year
• $20,520 over the life of the loan

That’s a significant difference, particularly compared to negotiating the list price — which often saves just a few thousand dollars (though still a nice chunk of change).

Though most people don’t attempt it, LendingTree senior economist Jacob Channel says that asking your lender for a lower rate on your mortgage when you’re buying or refinancing can pay off — especially if you’ve got a high credit score and little debt.

But lastly, sometimes, perfection can be the enemy of progress. Accepting a good mortgage rate or home price (even if it’s not ideal) might be your best option when buying a house in today's market.

In speaking to Kathy Connelly, COO of Berkshire Hathaway HomeServices Georgia Properties, she offers her advice to home buyers in the market today:

"In a low inventory market, sellers are looking for offers from the most qualified buyers to avoid any obstacles to closing. We recommend that buyers come to the purchase market with a full mortgage approval giving sellers confidence that the buyer is financially qualified and can get to the closing table."

Looking for some additional advice? Try these:

Housing Market Predictions For 2023: When Will Home Prices Be Affordable Again?

Is Now a Good Time to Buy a House?