Should Sellers Be Worried About Falling Prices?
If you’ve been following the housing market over the past four years, you’ve likely
noticed its rollercoaster-like trajectory. Home prices soared to unprecedented
heights, driven by historically low housing inventory, even as interest rates more
than doubled since 2020. While buyers have been paying more, the lack of
available homes has kept competition fierce, ensuring sellers retained control.
However, the landscape has shifted recently. Starting around September/October
2023, the housing market began cooling. Though it remains a seller's market,
sellers are seeing changes that reflect a slowing demand. Homes that might have
received 4-5 offers in 2021 are now getting just 1-2, and properties are sitting on
the market longer.
Why the Shift?
Two key factors are driving this change:
Global Economic Uncertainty: Over the past year and a half, worldwide
economic instability—driven by factors like the wars in Ukraine and Israel—has
had a direct impact on buyer confidence. When uncertainty looms, buyers
tend to hold back, wary of making large financial commitments like
purchasing a home.
Rising Inventory: Although housing inventory remains below healthy levels,
we've seen a gradual rise since 2022. Even a 20% increase in inventory
translates to thousands of additional homes nationwide. With more options
available, buyers have slightly more power, and sellers are facing a less
competitive market than in previous years.
Will This Trend Continue?
While the current shift may give buyers a bit more breathing room, it’s not a
signal that the seller’s market is over.
Interest rates were close to 8% as recently as late 2023, but they've dropped
significantly, hovering around 6% for several months. Last week, the Federal
Reserve announced further rate cuts, which will push mortgage rates even lower.
This is great news for buyers, as it increases their purchasing power in the short
term. But the real beneficiaries are sellers.
The Impact of Lower Interest Rates
Historically, when the Federal Reserve lowers rates, it sparks a surge in demand.
We saw this in 2020, when rates fell below 3%. While buyers celebrated the lower
rates, the market quickly became hyper-competitive. Investors jumped in,
submitting cash offers from afar, making it tough for everyday buyers to
compete. As demand skyrocketed, home prices surged by 25-35% between 2020
and 2022, despite the lower interest rates.
So, should sellers worry about falling prices? Not at all. Although we’re not likely
to return to 3% rates anytime soon, the Fed’s intervention is expected to stimulate
buyer demand once again. Investors will likely re-enter the market in greater
numbers, and with inventory still well below healthy levels, demand will likely
outstrip supply, pushing prices higher.
What Should Sellers Do in the Next 6-12 Months?
If you’re planning to sell in the next year, the outlook remains positive. As a seller,
you still hold most of the leverage. Prices are unlikely to decline in the near future,
and inventory is expected to stay relatively low, leaving buyers with fewer choices.
While your home may not sell as quickly as it would have in 2021, when some
properties went under contract in just two days, a longer selling period—1-3
months—is a more balanced, healthy timeframe. If you price your home within
market value and are patient, you should have no trouble achieving your target
selling price.
In this market, it’s essential to work with a trusted real estate advisor who can
help you navigate the shifts and ensure you’re positioning your home correctly.
While the market dynamics have evolved, rest assured that we’re still firmly in a
seller’s market.
In conclusion, sellers shouldn’t be worried about falling prices—in fact, they
should prepare for increased demand. As long as you remain patient and
strategic, you’ll be well-positioned to take advantage of the current market
conditions.
Written By
Sam Wurm, Executive Vice President of Nebraska Realty and Embarc Realty
