As home buyers become more fearful about the strength of the economy, they are treading cautiously in the housing market. Many would-be buyers are putting their home searches on hold and waiting to see if recession becomes reality. In the short term, that dynamic is helping to cool buyer competition—and buyers who act now to purchase may find themselves in a more powerful negotiating position.
Consumer sentiment about the national real estate market improved in August, mostly due to a large share of Americans who think mortgage rates will continue to fall, according to Fannie Mae’s most recent housing index. But fewer buyers say they think now is a good time to buy, and fewer homeowners say they think it’s a good time to sell. “Unfortunately, much of the lower interest rate environment can be attributed to global economic uncertainties, which appear to have dampened consumer sentiment regarding the direction of the economy,” says Doug Duncan, chief economist at Fannie Mae. “We do expect housing market activity to remain relatively stable, and the favorable rate environment should continue supporting increased refinance activity.”
Kelley McMahon, a sales associate at Compass in the Dallas area, says it’s no longer a seller’s market. “Now is not the time for sellers to put out these crazy prices,” she says. “Appraisals have gotten a lot harder, and buyers are a little more cautious. They’re more willing to take their time.”
Indeed, a new Redfin study shows that about 10% of offers written by real estate agents in August were made on properties that were under a bidding war, down sharply from 42% a year ago. The supply of homes is still tight in the lower price points. “Despite remaining near three-year lows, mortgage rates have failed to bring enough buyers to the market to rev up competition for homes this summer,” says Daryl Fairweather, chief economist at Redfin. “Recession fears have been enough to spook some would-be buyers from making the big financial commitment of a home purchase.”
Home buyer Dustin Collins, who was touring Dallas properties, told CNBC that he and his wife don’t feel the same urgency to purchase as they did last year. “For us, knowing that that kind of a frenzy is over, it’s more about finding the right house for us than paying too much for it,” Collins said. “I feel like now houses are sitting a little longer. It just gives us a little more opportunity to find the house we want.”