This time last year, things seemed to be improving for the U.S. housing market. Mortgage rates and inflation were falling. Inventory was on the rise. Home prices appeared to be leveling off. And when the Federal Reserve cut the federal funds rate by half a point in September 2024, it looked as though mortgage rates might drop further.
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As it turned out, last year’s falling rates were largely anticipatory, reflecting an expected federal funds rate cut. In addition, the economic strength that prompted the rate cut drove 10-year Treasury yields up, and with them, mortgage rates.
Higher inventory and slightly lower home prices haven’t been enough to pull the housing market out of the slump. Uncertainty over how tariffs might affect consumer prices, and skittishness over jobs, are two of the factors keeping buyers on the fence. Here’s what that means for your wallet.
What the Housing Slump Means for Buyers
While increased inventory hasn’t reversed the housing market slump, it has given buyers more options. Nationwide, home sellers outnumber homebuyers by 500,000, according to Redfin.
That imbalance is a factor in moderating home prices, and it could be especially beneficial now that prime buying season has passed. In addition to slowing the growth of home prices, excess inventory gives buyers more negotiating power.
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Even if you can’t get a price reduction, you might ask for seller concessions, where the seller pays some or all of your closing costs by allowing you to finance them or by paying them outright. Negotiating power can also sway the seller to make repairs or agree to other conditions.
What the Housing Slump Means for Sellers
Sellers have had the upper hand since the housing crunch began, and they still do in some markets. But in places where buyers rule, the need to price competitively might come as a shock to sellers who expected bidding wars on their homes.
A realistic price is especially important in markets where home prices are falling: Start too high and you could get caught in a race to the bottom of the market.
Competition among sellers also means your home should be in tip-top shape before you list it. You might even consider ordering your own home inspection and sharing the report with prospective buyers. Eliminating concerns about the condition of your home can give you a definite leg up on the competition.
Finally, don’t skimp on the marketing. Professional photos, and marketing copy written by a local market expert who’ll add nuances you can’t get from AI, are key.
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This article originally appeared on GOBankingRates.com: Why America Is Still in a Housing Slump — and What That Means for You
