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Pending home sales are declining despite an increase in new listings, as buyers hesitate due to high mortgage rates and economic uncertainty. This divergence creates a unique market where motivated buyers have increased negotiating power. Based on a recent industry report, the typical home is taking a week longer to go under contract compared to last year, signaling a clear slowdown in transaction pace.
The primary factor causing buyer hesitation is the high cost of borrowing. While mortgage rates briefly dipped to a 10-month low, they have since ticked up and remain more than double the record lows seen in recent years. This, combined with a 2.1% year-over-year increase in the median sale price, exacerbates affordability challenges. Furthermore, some prospective buyers are feeling cautious about making a large financial commitment amid concerns about the economy, including weak employment reports.
For buyers who are financially prepared to transact, the current dynamic offers distinct advantages. The slowdown has created what industry professionals identify as a buyer's market in many areas. With homes taking longer to sell, buyers can often negotiate for price reductions, home inspections, and concessions like closing cost assistance. In one example, a seller whose home had been on the market for over 100 days agreed to a $15,000 price reduction and included furniture and outdoor amenities to secure a deal.
Certain property types and markets present more favorable conditions for buyers seeking value. Nationwide, there is a significantly larger supply of condos relative to buyer demand, creating a 72% surplus of condo sellers. This imbalance can lead to better negotiation leverage for condo shoppers. Another option is new construction; some builders are offering incentives like mortgage-rate buydowns, where the builder pays to temporarily reduce the buyer's interest rate, to attract purchasers in communities with high inventory.
The national trend of declining pending sales masks significant regional variations. Market data shows a patchwork of performance across major metropolitan areas. For instance, pending sales have fallen by over 13% in Seattle and San Antonio, while markets like Pittsburgh and Philadelphia have seen pending sales increase by nearly 10% or more. This highlights the importance of understanding hyper-local market conditions rather than relying solely on national headlines.
Based on our experience assessment, the current housing market requires a tailored strategy. For sellers, pricing competitively and being open to concessions is crucial. For buyers, the key takeaways are:
