Dear Egghead: My father says we are entering a buyer’s market in housing. Is this true, and does it mean I should take advantage now by actively searching for a home?
ANSWER: I think your father is correct: We are entering a buyer’s market. More homes are becoming available, and demand is waning. But that doesn’t necessarily mean that this is the precise time to upgrade to a new house or invest in rental properties.
We are trending toward a buyer’s market, exemplified by four factors:
Interest rates are heading higher. Higher rates mean that fewer people can qualify for a mortgage, and those who can still qualify may be qualified for a much smaller loan than was possible a year ago. Fewer buyers equal less competition among buyers, and more competition among sellers.
More inventory is appearing on the market. During the past few years, available housing had become restricted because of hot competition among home buyers and investors. Now, buyers are stepping back somewhat, and backing out of deals. Anecdotally, some agents report that inventory has quadrupled since March. More inventory creates more competition among sellers.
Damage from weather events. This spring and summer has seen unprecedented disruption of markets due to wildfires and floods, perhaps a sign of more disasters to come. These natural events can crater property values and market activity in the affected regions.
Increased time on the market. It’s taking sellers longer to find a buyer. They’re increasingly more willing to negotiate, to lower their price, and accept contingencies for issues like home inspections and appraisals.
Is it the right time to buy? As someone once sang, “only fools rush in.” The tide has just begun to turn, and you should let matters continue on their course — if, that is, you do not need to purchase in the immediate future. If you do need a new house, and your finances can support it, and you’ll probably occupy the home for at least five years, then my advice is to strike now.
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