Has the market gone cold? It depends on your region
Agents across the country are seeing a change in buyer activity, but some markets are still faring well in the face of economic uncertainty.
- Changes in buyer behavior are forcing some agents to have “difficult” conversations with sellers.
- Conditions vary regionally; areas including upstate New York and the Midwest, where the markets have not experienced the “wide swings” seen in coastal metros, remain strong for sellers.
- A cooler market gives agents time to “embrace change” and focus on real estate fundamentals.
After a frantic two years of low interest rates, low inventory and high demand, the real estate market has become as erratic as a high-school romance.
Buyers, who had been coming on strong with immediate, multiple and escalated offers, have become cool and coy. They're taking their time, asking for concessions, making offers close to or even below the asking price, and are not willing to waive inspections and appraisals. The urgency seen in 2020 and 2021 is no longer there.
As a result, sellers are confused and feeling ghosted, and agents are playing the part of reassuring parents, trying to make sense of the impact that higher interest rates have made on the market and adjusting their own approach to selling.
"You can absolutely feel the change in activities," said Hedda Parashos of Palisade Realty in San Diego.
Just two years ago, she said, "Buyers couldn't write an offer fast enough and were overbidding seconds after the home hit the market. Now, buyers are taking their sweet time, moving like molasses or just giving properties the cold shoulder."
"Cold," agreed Jill Leberknight, of eXp Realty in Austin, TX. "The buyer market is acting like it had too much to drink at last night's event and has entered that phase of 'I never want to look at tequila again.'"
But how the market is faring depends on who you ask, said Jason Sokody of The Sokody Sales Team/Howard Hanna Real Estate in Grand Island, New York, near Buffalo.
Western New York is "more insulated" from the effects of rising interest rates and inflation than other areas, said Sokody, consistent with a September Redfin report that placed cities in upstate and western New York among the top 20 markets cooling the slowest.
"Any seller that has a property with no deficiencies is still getting top dollar," he said, though homes that are "in rough shape" are just sitting now, as buyers are not willing to purchase out of desperation.
The slowing market can be good news for first-time buyers and others who haven't been able to compete. "The great thing about that is that it opens up the market for VA and FHA buyers who have had trouble with the system over the last two years," he said.
Still, agents are having what Parashos called "difficult" conversations with sellers.
"They're having a hard time understanding what just happened," she said, "no matter what current data you show."
Constant market updates and communication are key to helping sellers adjust to the current conditions and – in many cases – lower the price so their homes will sell.
"For the first time in a while, we are seeing price reductions and homes going past delayed negotiation periods," said Danielle Johnson of The Property Girls Team/Keller Williams in Rochester, New York.
In the middle of the country, though, sellers are holding strong, knowing that homes in good condition will sell at or near the asking price.
"Our area is not experiencing wide swings like those of both coasts," said Michael Hagen of The Hagen Group in Overland Park, Kansas. "Interest rates are still good, just not 2% to 3%."
In the Mountain West region, the market has been slowed by interest rates, "but it is starting to pick up again," said Scott Nordby of Berkshire Hathaway in Denver. "More like 2019 activity without all the multiple offers."
The low end is "sluggish," he said, while the upper end is "still moving forward," although more than half of sellers have made price cuts.
The cooling market has caused agents to take a "back-to-basics" approach, where they spend part of their day connecting with past and present clients, sharpening their staging skills and training staff to move – no matter where the market stands.
Said Sokody: "The day-to-day may have changed, but the hustle hasn't. Instead of being more predominant on the list side, we have loved the change and embraced it."