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More Desperate Home Buyers Than Desperate Sellers

  • 2 min read

Many potential home buyers are hesitant, waiting for prices to decrease to levels they’ve imprinted from the past. They base their expectations on what they saw in previous years, expecting a return to lower prices and interest rates.

Imprinting works both ways.
However, sellers also have imprints of past market values, which may not align with buyers’ expectations. Most homeowners have equity and financial stability, making them less likely to be in urgent need of selling their homes.

The Shift in Underwriting Standards
Over the last decade, mortgage underwriting has become more stringent, resulting in fewer homeowners in dire financial situations. This further reduces the pool of desperate sellers in the market.

Desperate buyers vs. sellers
The imbalance between desperate buyers and sellers tilts heavily towards the former. While some sellers might consider selling, their numbers are significantly lower than those of eager buyers trying to enter the housing market.

Financial Realities for Homeowners
Homeowners with mortgages from the past decade have relatively low rates, making it financially unwise for them to sell and try to find cheaper alternatives, especially with rising rental costs.

The Waiting Game
Many renters, seeing the market continually move away from them, wait for prices to decrease. However, despite various events like the pandemic and interest rate fluctuations, significant decreases in real estate prices have yet to materialize.

Market Dynamics
While the rate of price increases has slowed, significant drops akin to pre-2018 levels are unlikely. Sellers, holding onto their properties, are unwilling to lower prices to meet buyers’ expectations.

Buyers’ Persistence
Buyers who were once eager to purchase homes are still in the market, albeit facing affordability challenges. This persistence, coupled with the scarcity of desperate sellers, contributes to the market’s resilience.

Sellers’ Rationality
Many sellers, content with their current situations, see no need to sell unless the market meets their price expectations. The prospect of buying another home at inflated prices further dissuades them from selling.

Conclusion: Long-Term Market Stability
The current market dynamics indicate that significant decreases in home prices are unlikely in the near future. With fewer desperate sellers and persistent buyer demand, the market is poised to maintain stability, albeit with fluctuations in pricing.

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