With a cooling market, buyers and sellers may want to change strategies.

What is happening in this rapidly cooling real estate market, and what are buyers and sellers doing about it? There have been massive changes in the market, and I’ve got all the latest numbers to help us understand it.

Starting at the beginning of this year, San Diego became the least affordable city in the nation when comparing the median home price to median income. Since then, mortgage rates have doubled. So have home prices decreased to counterbalance that? In the monthly new cycle, it might seem like it, but if we compare year-over-year numbers, we’re still up 3.5% over last year.

The number of new listings is down about 25% over last year—which is a dramatic decrease—the number of pending sales is going down—indicating that people aren’t buying—and the number of active listings is staying flat. For buyers and sellers, this is an indication that the market is cooling off, but prices are not yet dropping dramatically.

With interest rates soaring and people being priced out of the market, buyers are likely to have an easier time bidding. This isn’t a huge help, as those buyers who have to get a mortgage will still be paying quite a lot more.

With this in mind, buyers and sellers are getting more creative. They are negotiating some pretty great deals with assumable FHA and VA mortgages. These do require you to make up the difference between the sale price and the mortgage amount, but in some cases where the buyer doesn’t have the cash for this, sellers are agreeing to entertain carryback. This means that the seller is effectively becoming the second mortgage holder.

Buyers and sellers are also negotiating 3-2-1 buydowns, which are a great short-term solution to the interest rates. These allow buyers to pay a decreased interest rate on a specific schedule before it returns to the normal rate. This can be effective since many are predicting that the interest rates will fall.

Things are likely to stay flat in the market through the end of the year, but interest rates are forecasted to improve in the new year, meaning buyers are likely to start returning to the market. What this all means is that buyers have a great opportunity right now, and sellers should be prepared for some creativity and negotiation. 

If you have any questions about any of this or real estate in general, please don’t hesitate to reach out by phone or email. I’d love to help you out.