Today’s housing market is made up of four different groups: cash buyers, buyers getting a mortgage, homeowners who feel stuck with their low rate, and builders with new homes to sell. Where you fit in can shape the best way to approach buying or selling. Ryan Serhant, CEO of SERHANT, agrees:
““There is no longer a housing market . . . There are four Americas.”
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Here’s a closer look at each group and what it means for you.
Cash Buyers: 1 in 4 Buyers Are Paying with Cash
If you already own a home, your equity may give you the option to buy your next home with cash. According to the National Association of Realtors (NAR), 26% of existing home sales this summer were cash purchases. That’s about 1 in 4 buyers who didn’t need a mortgage.
Data from Realtor.com shows that cash buyers are concentrated at both the very high and very low ends of the market by price point:
For Buyers: If you can buy with cash, your offer may stand out to sellers because there’s no financing contingency. You could also have a quicker closing and more flexibility when negotiating.
For Sellers: Cash offers can reduce the risk of financing issues, but they may sometimes come in lower. Look at the full offer before deciding which one makes the most sense for you.
Buyers Using Financing: They’re Not Getting Help from Rates, But They Are from Sellers
If you’re planning to get a mortgage, it’s important to know that mortgage rates may not drop significantly anytime soon. Data from Fannie Mae shows that nearly half of experts have raised their long term rate forecasts this year:
That can be challenging for buyers who need a mortgage, especially first time buyers. But there’s still some good news.
While buyers may not be getting the lower rates they hoped for, there’s still room to ask sellers for help with the costs that matter most. Redfin data shows nearly half of May home sales included a seller concession, such as a rate buydown or credit toward closing costs.
For Buyers: Instead of waiting for rates to drop, consider negotiating for a seller concession. If the monthly payment fits your budget today, that could be your opportunity.
For Sellers: Be prepared to negotiate. Factoring a possible concession into your pricing strategy from the beginning could help get the deal across the finish line.
Rate-Locked Homeowners: Most Are Sitting on a Rate Below 5%
If you already own a home, you may be hesitant to move and take on a higher mortgage rate than the one you have now. And you’re not alone. According to Federal Housing Finance Agency (FHFA) data, about 2 in 3 homeowners have a mortgage rate below 5%:
When you have a mortgage rate that low, it can be hard to give it up and move. The next home would likely come with a higher rate, which is why so many homeowners feel “rate locked” and hesitant to sell.
According to Fannie Mae data, most experts expect this rate lock in effect to stick around for another 3 to 5 years. That means it could continue to impact how many homeowners decide to put their homes on the market.
For Buyers: Fewer homeowners are putting their homes on the market, but those who do often have a strong reason to move. That can mean more motivated sellers who may be open to negotiating.
For Sellers: Take a look at what your current equity could help you afford before deciding a move isn’t possible. If you have an FHA or VA loan, ask whether it can be assumed. It’s not common, but it could be a valuable selling point.
Homebuilders: They’re Negotiating More Than You Think
If you’re considering a new construction home, this could be a good time to take a look. According to the latest Census data, builders have more unsold homes than usual, with nearly 10 months of inventory at the current sales pace compared to the typical 4 to 6 months. That’s leading many builders to offer price cuts and mortgage rate buydowns.
For Buyers: This is where you may find some of the best opportunities right now. Just make sure you have your own agent and compare the entire incentive package, not just the price.
For Sellers: Highlight what new construction can’t offer, like mature landscaping, an established neighborhood, and a home that’s ready to move into today instead of months from now. Those features can make your home stand out.
Bottom Line
Right now, there are four different housing markets happening at the same time: cash buyers, financed buyers, homeowners with low mortgage rates, and builders. Each group has its own set of circumstances, so the right strategy for one may not work for another.
Let’s figure out which group you’re in and then plan your next move from there.
