Homebuyers can expect a kinder, gentler market as 2013 continues with more inventory, fewer bidding wars and more modest price gains. However, the housing recovery remains a strong seller's market with low appraisals one of the few obstacles sellers face.
The latest survey in a series that tracks boots-on-the ground intel, tech-powered real estate brokerage Redfin surveyed 380 of its real estate agents in 22 major metro markets from June 21 through June 25 and found some moderation in the housing recovery.
There has been a recent softening of the market," explained a Redfin real estate agent Mark Biggins, reacting to the Redfin Real-Time Agent Sentiment Survey for the second quarter. "Inventory has begun to increase steadily, while buyers are becoming fatigued and dropping out. The buyers that are active have more homes to choose from and this is spreading out demand, reducing the number of offers any given house will receive," Biggins added.
Buyers Gain Ground
Homebuyers still struggle with low inventories and relatively heavy competition, which pressure prices to rise, Redfin reported.However, 93 percent of agents pointed to low inventory and multiple offers as the most common challenges facing buyers, down slightly from 96 percent in the first quarter.
For buyers, less competition means reduced negotiation stress, fewer buyer giveaways and smaller price gains.
Just 11 percent of agents recommend that buyers use aggressive strategies such as waiving contingencies and expanding their budget when facing a bidding war, down from 15 percent in the first quarter. Also, 86 percent of agents believe home prices will rise in the coming months, versus 97 percent in the first quarter. Sixteen percent expect home prices to “rise a lot,” down quite a bit from 44 percent in the first quarter, Redfin reported. IIn both cases, the smaller shares signal a gradual move away from the ferocious competition triggered by multiple offers that were a market staple earlier this year.
It's still not a walk on the beach for buyers.
Some 46 percent of agents said they believe it is a good time to buy, down from 57 percent in the first quarter. Also 7 percent of agents believe now is a bad time to buy, up from 5 percent in the first quarter.
Redfin agents advise buyers to fight the good fight but know when to surrender in a bidding war. Buyers have to be ready to pay more than list price, but not so much that it breaks their bank and they end up paying more than the home will be worth in a short period of time.
Lenders remain tight and won't support bids above the appraised value, unless the buyer is prepared to come up with the difference in cash.
Sellers Lose a Little Leverage
Sellers face a growing prospect of diminishing returns as the housing recovery proceeds. Redfin said 86 percent of agents believe home prices will rise in the coming months, versus 97 percent in the first quarter and 16 percent expect home prices to "rise a lot," down from 44 percent in the first quarter.
Still, sellers rule as 86 percent of agents surveyed described now as "a good time to sell," up from 82 percent in the first quarter. The greatest obstacle agents say sellers face is low appraisals that perhaps aren't keeping up with projected home price changes, but lenders rarely budge without real-time comparables or sufficient pricing data to back up a higher appraisal.
While 40 percent of agents say sellers face appraisal problems as the number one obstacle, 38 percent say sellers' own unrealistic expectations create challenges for them and only six percent say buyers facing financing dilemmas also challenge sellers.
More than in one in five agents, 21 percent, said sellers face no major challenges.