Selling Your Home in a Changing Market
If you’ve been paying attention to the real estate market recently, you may have noticed that things are changing. “For Sale” signs have stayed up for weeks instead of days and “Price Reduction” banners are becoming increasingly common. While we’d all love to be able to time the sale or purchase of our home with ideal market conditions, life rarely waits for the perfect moment to happen. It may not be the easiest time to sell your home but, with good information and the right strategies, you can hit your housing goals.
Real Estate Market Basics
If you’ve ever spent a day at the beach watching the tide go in and out, you can appreciate that nothing stays the same for long. The real estate market is no different and cycles between buyers’ and sellers’ markets. Experts who have studied long-term market trends suggest that a typical real estate market cycle lasts between 10 and 18 years.
These natural market fluctuations are caused by multiple factors including changes in interest rates, taxes and tax incentives, job markets, and even international policies. Economic and social forces as big as a global pandemic or as local as a new public transit stop can influence where and when people move.
At the time of writing, both the Nashville and broader U.S. real estate market are transitioning from an extreme sellers’ market to a buyers’ market and, like many big changes, it can feel uncomfortable for those trying to navigate it. Sellers are having to make concessions, wait for weeks for the right buyer, or both while buyers are still feeling squeezed by high interest rates and even higher home prices.
How We Got Here
Nashville in particular has experienced extreme price increases over the last 14 years. In 2010, my husband and I purchased a 3-bedroom brick house on over half an acre in Inglewood for under $100k. The real estate market was still recovering from the 2008 recession and homeowners were struggling to sell their properties. We offered 10% below asking and the seller happily accepted.
Over the last decade, U.S. homebuyers have had some of the lowest mortgage rates in history with rates hitting a record low of 2.65% in January of 2021. This cheap financing created a sellers’ market that saw home values in our neighborhood increase by 17% per year for seven years straight.
As more and more buyers took advantage of low interest rates, the housing market turned into a feeding frenzy. During this time, I saw how these market forces impacted both the buyers and sellers I worked with. It wasn’t uncommon for homes to be listed and go under contract within a single day. In April 2021, one of our sellers received five above-listed-price offers and ultimately accepted a bid that was $53,100 above their original asking price.
While this market was wonderful for the sellers, buyers faced a grueling and brutal battle to purchase a home. Home buyers were under intense pressure to view new listings and make an offer as quickly as possible. To appeal to sellers, some buyers forfeited their right to a home inspection and even waived their appraisal contingency, agreeing to ‘make up the gap’ when the appraised value was less than the purchase price.
Where We Are Now
Fast forward to the summer of 2024 and buyers and sellers are navigating a vastly different real estate market. My buyer was able to snap up a property for 3% below the seller’s rock-bottom list price. The seller had already significantly lowered their asking price after the property spent nearly 6 months on the market.
On the other side of the coin, my two current listings had abysmally low showings, leaving my sellers feeling deflated and frustrated. My inbox has been flooded with real estate promotions from other realtors in similar situations. One-third of these emails are advertising price drops. Colleagues have been posting to the office Facebook group asking if others were experiencing unusually low numbers of showings. One realtor had a property on the market for 80 days without a single showing.
Thankfully both of my listings are now under contract. One listing only received an offer after a series of price drops. The other seller offered major concessions to help the buyer afford their downpayment.
Despite being a “buyers’ market,” many house hunters are still struggling to find a home. High interest rates coupled with historically high home prices have kept many buyers out of the market. Investors and luxury buyers who are less impacted by conventional mortgage rates make up an unusually high percentage of the current buyer pool.
My seller Jenny’s one-bedroom condo, located smack-dab in the heart of East Nashville, only had a few showings, most of which were investor-buyers. In addition to a higher-than-average HOA fee, Jenny’s condo complex had limitations on how and when units could be rented, including a requirement that owners occupy the unit for 24 months before renting and an outright ban on short-term rentals. The investors all walked away, and it took 44 days and multiple price drops before Jenny accepted an offer from a traditional home buyer.
Unfortunately, some investors are trying to take advantage of increasingly desperate sellers. Opportunistic investors looking for a bargain will try to tempt distressed sellers with all-cash, low-ball offers and quick closings. I recently received an offer from one of these investors that was 30% below the listed price. While sellers need to be ready to compromise on price, such a low offer is usually far from most homeowners’ best option, even in the most challenging of markets.
Navigating a Changing Market
So how can sellers navigate this challenging market? Sellers have two tools at their disposal: timing and pricing. Homeowners who aren’t in a rush to sell might choose to delay listing their house.
But not everyone can sell at their leisure. For sellers on a time crunch - whether due to a new job, growing family, or any other reason - adjusting their asking price to meet the market is their best (and, really, only) choice. Savvy sellers will be quick to respond to the realities of the current market rather than clinging to the past.
Where We’re Headed
Just like every tide eventually turns, every market eventually goes through a period of correction. We’re currently in the midst of one of those corrections. After years of an extreme sellers’ market, the pendulum has started to swing back toward buyers. The average days-on-market is longer, prices are falling from their peak, and experts anticipate federal interest rates to fall in the coming months. All of this coupled with rising inventory is good news for buyers. Homebuyers will find themselves with more options and more bargaining power as the market continues to correct itself.
As for sellers, there will no doubt be another red-hot sellers’ market in another 10-18 years.
Wrapping It All Up
Whether you’re considering lowering your price or waiting for a drop in interest rates, good intel is the key to making the best decision for you or your family. Working with a realtor who understands both the buyer’s and the seller’s perspective is invaluable. These professionals bring best practices and strategies for navigating the constantly changing real estate market. If you need help finding the right time to buy or sell your home, call Zelda Sheldon with Nashville Real Estate Rockstars at Benchmark Realty LLC: (615) 720-7192 or office: (615) 432-2919