Housing News

Why a Slower Housing Market Could Mean Better Deals for Homebuyers

Homebuyers hoping to score a better deal may have something working in their favor: fewer people are competing for homes.

Mortgage applications to purchase homes have fallen, pending home sales remain sluggish, and homebuilders are struggling to attract customers. For buyers ready to make a move, the slowdown could create opportunities to negotiate lower prices and other money-saving concessions.

The latest Mortgage Bankers Association survey found that purchase applications fell 7% in the week ending October 16 and were 18% lower than a year earlier.

“Rates are elevated, yet inventory remains constrained in many markets, and motivated sellers are still negotiating,” wrote Ryan Schoen, principal analyst at New American Funding (NAF), in his latest Weekly Insights report.

Fewer homebuyers could mean better deals

The slowdown extends beyond mortgage applications.

Pending home sales, which measure homes that have gone under contract but haven’t yet closed, remain approximately 45% to 58% below their August 2020 peak across different regions of the country, according to Schoen’s analysis.

The comparison reflects how much the market has changed since the unusually active early months of the pandemic housing boom.

More recently, pending sales fell 11.3% nationally in September compared with a year earlier, according to the National Association of Realtors (NAR). All four regions experienced declines, ranging from 8.7% in the Midwest to 15% in the West.

The slowdown appears to be prompting some sellers to reconsider their asking prices. Nearly 21% of active listings had price reductions in September, the highest share for that month since 2018, according to Realtor.com data cited by the NAR.

A homeowner who needs to relocate for a job, for example, may be more willing to accept a lower offer to avoid carrying two mortgages. Others may agree to make repairs or accommodate a buyer’s preferred closing date.

Still, negotiating opportunities depend on local conditions. Homes in desirable neighborhoods with limited housing stock may continue to attract multiple offers.

Homebuilders are struggling to attract buyers

Buyers considering newly constructed homes may have another opportunity to save.

More builders view market conditions as poor than good, according to the National Association of Home Builders (NAHB)’s October Housing Market Index.

“Present conditions, expectations for the next six months, and traffic of prospective buyers are all depressed,” wrote Schoen. He noted the West and South are experiencing particularly weak builder sentiment.

Builders are already responding to the slowdown. In October, 43% reported cutting prices, the highest share since 2020, according to NAHB. The average price reduction was 6%, while 65% of builders reported offering sales incentives.

For a $400,000 newly built home, a 6% price reduction would amount to $24,000 off the purchase price.

Builders may also offer mortgage rate buydowns, assistance with closing costs, or upgrades to appliances, flooring, and other finishes.

Buyers should ask which incentives are available, particularly on completed homes that builders may be eager to sell.

How to spot a seller who may be ready to negotiate

Not every seller is willing to budge on price, but certain signs can suggest there’s room for a deal.

A home that’s been listed for several months may indicate the asking price is too high or that the property hasn’t generated much interest. Multiple price reductions can also suggest that a seller is becoming more realistic about what buyers are willing to pay.

Another potential clue is a property that returns to the market after a previous deal falls through. The seller may be eager to find a new buyer, particularly if they’ve already purchased another home or have a deadline to move.

Homebuyers can ask their real estate agents to investigate why a property hasn’t sold, how long it’s been listed, and whether the seller has indicated any flexibility.

They should also review comparable recent sales to determine whether the asking price reflects current market conditions.

Beyond negotiating the purchase price, buyers may be able to secure help with closing costs or repairs identified during a home inspection.

A seller-paid mortgage rate buydown could also make monthly payments more manageable. Depending on the arrangement, the interest rate may be reduced temporarily or for the life of the loan.

The goal is to negotiate terms that provide the greatest financial benefit rather than focusing exclusively on the asking price.

Could lower mortgage rates provide another opportunity for homebuyers?

Schoen also identified a potentially encouraging development for homebuyers: a recent decline in the yield on the 10-year U.S. Treasury, an important benchmark for mortgage rates.

“Mortgage rates could be in for much better days ahead,” wrote Schoen.

Although lower Treasury yields don’t guarantee lower mortgage rates, a sustained decline could eventually make financing more affordable.

For buyers who are financially prepared, the current slowdown may offer an opportunity to negotiate favorable terms before any improvement in rates brings more competition back into the market.