A lot of buyers are holding off on entering the market, waiting for interest rates to come down. This hesitation is opening up more opportunities for those ready to buy right now. The Federal Reserve has already started cutting rates, and more reductions are expected. This is great news for potential buyers, but the best opportunity to buy may be before these rate drops are fully in place.
When rates do drop, the buyers who have been on the sidelines will likely rush back into the market. With the same amount of inventory and more competition, we could see prices start to climb again and the current buyer incentives sellers are offering disappear.
MARKET SHIFT FROM SELLERS TO BUYERS
After being in a fierce seller’s market for years, in 2022 the landscape shifted as interest rates increased dramatically and prices hit their peak. The buyers hit the stop button, prices dropped, and inventory increased. While the market started to come back in 2023, 2024 has been relatively slow and with the increase in supply we have shifted from a seller’s market to a balanced market although it feels much more like a buyer’s market right now.
RISING INVENTORY
With buyers sitting on the sidelines again inventory increased and is currently 49 percent higher than a year ago. This increased supply gives buyers more options and room to negotiate, especially with sellers who need to move their homes quickly.
SELLERS ARE MOTIVATED
One major advantage for buyers right now is the motivation of current sellers. While many are waiting until the spring to list their homes, some sellers need to sell now.
This urgency is leading to more price reductions and sellers offering incentives we haven’t seen in years.
STRONG NEGOTIATION POWER
In the current market conditions, the buyer has strong negotiating power — something you might not have once the market picks back up again.
Now is a great time to negotiate not only on the purchase price but asking the seller to contribute to the buyer’s closing costs and rate buy down, which can reduce the buyer’s monthly mortgage payment.
Buyers are also able to negotiate on repairs, with sellers more willing to do extra repairs than they were when we were in a seller’s market.
BUY NOW REFINANCE LATER
Don’t miss out on a great buyer’s market because you think you may be able to get a lower interest rate later. If rates continue to drop and are a good deal lower in six months, you can just refinance then and get into the lower rate, but you have already purchased the home at the lower price and with better terms.
THE ELECTION IMPACT
Another reason some buyers are hesitating is the upcoming election. It’s not uncommon for people to feel uncertain about making big financial decisions during political changes. Every election year, we see the market slow down as buyers wait to see what happens. But once the election is over, these buyers — along with those holding out for lower interest rates — will likely flood back into the market.
When that happens, the inventory we have now will go fast. Without enough new listings, we could quickly see multiple offers and increased competition again — especially with spring being Arizona’s busiest real estate season, with March, April, and May typically seeing the highest sales.
A STRONG SPRING MARKET?
The market is gearing up for a shift, and we’re expecting a strong spring in 2025. With the Federal Reserve likely to continue lowering rates and so many buyers waiting on the sidelines, we’ll probably see a big surge in activity once rates drop enough and the election is behind us. With two or three times more buyers competing for the same homes we have now — inventory will shrink fast, and we could be right back to a seller’s market with multiple offers and bidding wars.
DON’T WAIT TOO LONG
We’re in a sweet spot right now, but how long will it last? Buyers have the upper hand, inventory is higher, and motivated sellers are offering better terms. If you wait, you might find yourself in a much more competitive market in just a few months — higher prices, fewer options, and likely multiple offers.
Right now, with less competition, more favorable pricing, and better terms, this could be the best window of opportunity.
A BRIGHT SPOT ON THE HORIZON
If the rates continue to come down and come down low enough, the sellers who had super low interest rates in the three’s and didn’t want to give that up may decide it’s finally time to make a move and we will see more homes coming on the market. However, those sellers will also be buying again, so while the supply may increase with these sellers, so will the demand.
For more information on buying a home and how to negotiate the best terms, or a full list of available homes, please don’t hesitate to contact me.