California Buyers are Back in the Driver’s Seat

California Buyers are Back in the Driver’s Seat

December 8th, 2022

Recent media headlines have left prospective California homebuyers feeling hopeless.

Many home shoppers are feeling despaired with our recent mortgage rate hikes, costly home prices, and a low housing inventory.

Interest rates are higher, home prices are steep, and inventory is not ideal; if you look at the data, you will understand buyers have more power than they realize.

How Has the California Market Changed?

A new report from Realtor.com shows nationwide prices have notably declined from the exorbitant price tags we have recently seen. The number of houses on the market has risen considerably, rising 33.5% year-over-year. Homes are also staying on the market longer, forcing sellers to conform to market conditions.

We are seeing a power shift from sellers to buyers, creating a more balanced market where everyone wins.

Insane bidding wars, buyers paying all cash and waiving appraisals and home inspections, and paying a great deal over the asking price is old news. 

Now, sellers are accepting appraisals, and financing contingencies, and home inspections. 

A seller’s concession is used to reduce the buyer’s closing costs – these have made a welcomed return to the market, as well.

Seller concessions can be seen in the form of origination fees, interest buydowns, and home appraisal costs.

The Exit of Waived Contingencies

Last year, desperate buyers hoping to have their offer accepted waved finance and  inspections contingencies. 

Those days are no more,

We are now seeing sellers not only accept contingencies, but also assisting with closing costs and paying for home warranties.

Mortgage Rate Buydowns are Accessible

To combat the issue of housing affordability, many sellers are offering mortgage rate buydowns so buyers can afford to purchase a home.

The 3-2-1 Buydown and the 2-1 buydown are some of the most commonly utilized programs. The seller pays a certain amount upfront to buy the interest rate down using these buydown programs.

After one year, the rate goes up a certain amount, and in the following one or two years, the rate continues to climb back until it reaches its original rate. 

Using the 3-2-1 Buydown, if the current interest rate is 7%, the buyer will start with a 4% interest rate. The following year, they would pay 5%; the next year, they would pay 6%; and in year four, they would pay 7%.

High Home Prices Help Balance Out Rising Mortgage Rates

As we saw historically low-interest rates recently, we also witnessed sky-high home prices.

Although it may sound strange, the truth is, buyers can benefit from elevated interest rates. 

Higher mortgage rates rise, many prospective home buyers flee the market. This leaves less competition for buyers. With less activity, sellers often lower their asking price and are open to seller concessions. 

Less Competition Leaves Room for Lowballing

The number of days on the market directly influences a home’s price. Nationally, homes are sitting on the market for 51 days giving buyers more power to bargain for a lower price. 

The Bottom Line

Listening only to the media can easily dissuade you from buying a home. 

If you want to buy but the media reports are leaving you feeling discouraged, you should speak with a real estate professional to discover your options.