Buying a house has gotten a lot easier — though pricier.
The days of fighting multiple offers and waiving house inspections to even have a shot of buying a home are over in many parts of the country. Yet, even with decreased competition and slowing price increases, buyers aren’t rushing back to the housing market.
Interest rates hit 7.4 percent this week for a 30-year mortgage, the highest level in three years and one of the few times it’s reached that high in the past decade. With pricier mortgages looking like a long-term issue, would-be buyers are hesitating on the sidelines.
“Interest rates are the entire story,” said Stephanie Crawford, a broker in Nashville. “I think if interest rates would come down, there are a ton of people that would jump into the market.”
The housing market has generally been sluggish and threatens to slow even more as buyers struggle with affordability and economic uncertainty. It would now take nearly five months to exhaust the inventory of homes for sale, the highest level in more than 10 years, according to the National Association of Realtors.
Last month, the number of buyers hit a record low since Redfin began tracking the data in 2013. September marked the strongest buyer’s market in Redfin’s record. Nationally, sellers outnumbered buyers by 63 percent.
Most housing economists expected rates to go down near 6 percent this year, which was expected to inject new life into the housing market. But then the U.S. war in Iran hit, sending inflation higher and spurring the Federal Reserve to raise interest rates to curb price increases. At the same time, Treasury yield markets, which are closely tied to mortgage rates, surged.
In many ways, it’s a great time to buy a house. There are more listings on the market nationally, and buyer demand is dipping, meaning less competition for homes. Home prices are increasing at a slower rate in many parts of the country and in some cases, list prices are even dropping. Sellers, eager to off-load their homes, are offering contingencies and credits they never would have considered four years ago.
But years of high inflation have weighed on Americans’ budgets, and the dramatic home price increases during the pandemic have left a new house purchase out of reach for many. Combined with unexpectedly high interest rates this year, people are questioning if they can afford the monthly payments of buying a first or new home.
“We’re seeing buyers get even more reluctant to buy just because the math is higher,” said Daryl Fairweather, Redfin’s chief economist. “But instead of sellers retreating at the same time, they’re getting a bit nervous that if they don’t sell now, prices will fall next year.”
Sellers are also feeling the itch to move after many stayed put for longer than they intended because they felt locked in to their low mortgage rates, she said.
Home buyers who do dip their toes into the market can get concessions from sellers they never would have achieved three years ago. In Nashville, first-time home buyers Joe Hiebert and Annie Reagan bought a 1960s ranch-style home in June for about $482,000 — nearly $20,000 lower than the list price.
The home had been on the market for more than 40 days, and was pushing toward the top-edge of the couples’ budget. After negotiating a lower price, an inspection turned up several repair issues, including the need for a new roof. The couple were able to get an additional $23,000 in repair credits.
The price cut made the house more palatable to buy, even with high rates.
“When we started looking at interest rates rising, we had to look at a more conservative end of our budget,” Reagan said.
Nashville is the second hottest buyer’s market in the country, where sellers outnumber buyers by 152 percent, according to Redfin. Miami edged it out.
While people are still moving to Nashville, the housing market is a far cry from the frenzy of the late pandemic, when interest rates were low. The “urgency left over from covid has simmered out,” said Jacob Jones, founder of the Jones Group in Nashville.
“We’ve slowed down and I think everybody feels that,” he said.
The pace can be a shock to the system for sellers more accustomed to homes flying off the market and bidding wars.
“If a seller is not willing to price a home right and negotiate, it’s just a detriment to that house,” said Andrea Wall, a Redfin real estate agent in Nashville. “It’s a gigantic gap in between both buyers and sellers right now.”
A few miles outside downtown Nashville, in quickly developing neighborhood The Nations, Lee Mockmore and his wife bought a detached townhouse in late 2021 — the type of home called a “tall skinny” house in Nashville.
The house doesn’t have much of a yard, and Mockmore and his wife were eyeing an empty lot just across the alley behind their house, where they could plant trees and create a relaxing open space.
The owner listed the lot for $299,000, and Mockmore offered $200,000 for it. The seller countered at $245,000 but Mockmore stood firm and the seller walked.
A month later, the seller came back and asked if he still wanted to buy it for $200,000.
“I figured he’d probably come back,” Mockmore said.
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