- Kerry Melcher is the head of real estate at Opendoor, an iBuying real estate firm.
- If you’re trying to snag a dream home at the lowest price possible, Melcher says there are several clues to look for.
- Keep an eye on newer listings with a better price per square foot, as well as how easy it is to book a home tour.
After a year of seeing record-setting home prices and increased buyer demand across the US, the housing market has begun to show signs of cooling off around the country. But how can millions of hopeful homebuyers spot a potential cool-off in neighborhoods where they’d like to buy — and time their house hunt accordingly?
As the head of real estate at Opendoor, I stay on top of prices and fluctuations in the housing market. Market cool-off signs go beyond noticing your neighbors are finally talking about more than their home-buying woes. Here are three specific things to look for, and what to do when you notice the signs.
Editor’s note: Opendoor is an iBuying platform that purchases and resells homes around the country.
1. You see more ‘for sale’ signs in your neighborhood — and they aren’t disappearing overnight
In a strong seller’s market, the average number of days homes are available on the market decreases. Remarkably, 89% of residential properties sold in less than a month in June 2021, as compared to 56% in 2019. Sellers also reported an average of four offers on their homes in June, double the number from just two years ago — validating aspiring homebuyers who may have thought they were imagining that homes were selling overnight.
Are you looking to buy in a popular neighborhood? “For sale” signs hanging out for more than a few days without a ‘sold’ sign may indicate that a strong local seller’s market is beginning to slow down. Now is an ideal time to drive around your desired neighborhoods and tour some available homes. The start of a slowdown is also a smart time to check back in with your lender.
Let them know if your income or plans for a down payment have changed, and discuss any rate adjustments that have taken place since your previous conversation. Make sure any pre-qualification you received during the height of a buying frenzy is still accurate so you can adjust your search according to numbers both you and your lender feel comfortable with.
2. Homes are selling within the current price range for the neighborhood, rather than setting new record highs
A trifecta of low inventory, historically low mortgage rates, and increased buyer demand created a strong seller’s market, driving prices across the US to continue reaching record highs this summer. Do you know what prices homes have been selling for nearby or in your desired neighborhood?
It’s wise to keep a close eye on the local market so you can spot a potential cool-off as numbers shift. Pay attention to the new active inventory. As prices begin to normalize, you may see new inventory listing at a better price per square foot than with houses that have been sitting for more than 30 days.
When you notice prices are changing, invest time in understanding your ideal neighborhood — and surrounding neighborhoods — to become more familiar with home features and relative pricing. Buying often slows considerably in November and December, which may inspire some sellers to take an offer they might otherwise consider to be low. If your timeline aligns, it may be a good time to be more aggressive with your offer. You may be able to buy even more house than you initially thought possible!
3. You have noticeably more choice in available homes — and time to tour them
Amidst the hottest housing market we’ve experienced in decades, national inventory of active listings declined by more than 50% in early 2021 — leaving home shoppers with fewer homes to see throughout spring and summer months. Cooling markets allow for more choice, as well as more time for home shoppers to tour a property before it sells. If there seem to be more homes available and it’s noticeably easier to book a home tour, the local market may be cooling off.
To make the most of your search, be intentional about budgeting your time. You may still need to see multiple properties in one day, and it’s a smart idea to give yourself at least an hour for each property (including travel time). During your tour, focus on items that matter most: odors, the condition of walls and floors, any issues with integrated fixtures or systems (such as exposed wires or problems with the home’s HVAC system), unpermitted additions, and the lawn condition. Knowing which questions you should ask during a home tour will also help you stay focused and evaluate a potential property efficiently.
If you’re well-positioned to monitor for market cool-off signs and wait for a great deal, the best thing to do now is ensure you’re financially prepared in the future to buy the home of your dreams.
Kerry Melcher is the head of real estate at Opendoor, a third-generation realtor, and long-time member of the local Phoenix real estate business community.