A new Zillow survey of real estate agents has found the most common misconception among would-be homebuyers is that home prices will crash, while sellers are holding on to outdated expectations of bidding wars and quick sales.
Nearly half of Zillow agents (46%) said the biggest misconception among aspiring buyers is that home prices will significantly fall, while more than a third of agents (35%) say prospective buyers mistakenly think they should wait for high mortgage rates to come down.
As Freddie Mac reported last week, the 30-year fixed-rate mortgage (FRM) is still lingering in the 7% range, averaging 6.95% for the week ending November 3, 2022.
"Buyers may think it's better to wait out the market, but in reality, there is more opportunity in this market than I have seen in the past five years if buyers approach real estate as a long-term investment, " said Michael Perry, a Real Estate Agent who leads The Perry Group in Salt Lake City, Utah. "If prices or mortgage rates take a meaningful dip, all those sidelined buyers will likely come rushing back to the market, driving up competition and prices. If a buyer can purchase today, they have bargaining power, more options and more time to find the right home, instead of being rushed into a purchase they might regret."
Zillow research has found a rapid drop in home values is unlikely, with housing affordability at its worst in several years, with many buyers continuing to pull back. Zillow recently reported that home values are 24.7% above where they would need to be for affordability to return to recent norms. Zillow's home value forecast predicts a flattening of home values over the next year, with prices increasing 1.3% by September 2023. Fewer new listings will keep upward pressure on prices. Meanwhile, some housing economists believe mortgage rates are more likely to rise than to fall as inflation pressures remain strong.
Amid a volatile rate market, 44% of Zillow agents said the most important action first-time buyers can take is to line up financing before home shopping. More than a quarter of Zillow agents (28%) polled said the biggest mistake first-time home buyers tend to make is failing to separate their wants from their needs.
Nearly three in five Zillow agents polled reported that buyers are taking more time to consider a home (56%) and making offers below list price more often (55%). More than 40% of agents stated that today's buyers are including more contingencies in their offers (43%), such as inspection and appraisal contingencies designed to protect buyers from unexpected costs.
"Sellers can no longer put a for-sale sign outside their home and expect the offers to pour in," said Koby Sway, a Real Estate Agent with The Briley Team in Omaha, Nebraska. "They have to roll up their sleeves and make necessary repairs and home improvements before listing their home for sale. And it's more important than ever to get the pricing right when competing against other sellers for a smaller pool of buyers."
Many agents felt it's a common belief among sellers to expect multiple offers on their home (81%), a price above market value (79%), a quick sale (79%), and no need to cut their price (74%). Seventy-three percent of Zillow agents reported that pricing a home correctly is the most important seller strategy. Competitively priced listings are going under contract in 19 days nationwide, 10 days quicker than they were prior to the pandemic, while other homes are lingering on the market a median of 54 days. Meanwhile, 28% of sellers have been forced to cut their home's listing price, the highest share since 2018.