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Published: Apr 05, 2024 10 min read
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Spring is typically the busiest time of year for home sales across the United States, as families look to move before the new school year begins and the weather is right, even in cold-climate states.

The housing market has been anything but routine over the past few years, not least due to high mortgage rates and tight home inventory. Analysts are hedging their bets on whether this spring’s outlook will offer a return to relative normality. As Matt Vernon, head of consumer lending at Bank of America, puts it, there will be “both opportunities and challenges in the upcoming spring season.”

Here’s what both buyers and sellers can expect if they enter the market over the coming months.

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Curves to the spring home market

The distinctions to this year’s home-buying season start with its likely timing. Factors point to a late start to the season. While May is the month in which sellers typically get the most bang for their buck, a report from listing site Zillow found that the best time to sell a house (and to get above the asking price) has been shifting later in the season, to June.

The interest-rate environment could further slow down matters early in the spring. High interest rates have been a major dampener to the market, but the expected arrival of relief – some analysts predict the Federal Reserve will cut its federal funds rate in mid-June – could prompt an early-summer surge in home listings from sellers who have been discouraged from moving by high rates.

Then there’s the possible impact of a recent legal settlement that could change how realtors get paid, and by whom — the buyer or the seller. While there’s uncertainty over the effects and exact timing of the changes, they could happen as soon as July, which could potentially affect some timing decisions for buyers and sellers who enter the market in June or later.

Further, there’s the heightened challenge of covering home insurance costs, whose sharp rise in the past year makes them a bigger factor than before in the affordability of housing.

Here’s more about each of the factors above, and what they may mean for you if you’re poised to buy or sell a home this spring or summer.

Mortgage rates should go lower

The outlook for the cost of borrowing to buy a house this season is mostly positive. Mortgage rates have already eased back from their October 2023 high of 7.79% and rates in early April were about a percentage point lower than that. Although today’s rates are higher than those of a year ago, the gap is shrinking.

Those lower rates mean the monthly cost of financing a home is less than it was just a few months ago. Further, if the Fed delivers a rate cut in June — as some analysts expect — the cost of mortgages could drop. That could embolden buyers and sellers who have been strained to make a housing move because of the high cost of financing their new home.

On the downside, if lower rates (and borrowing costs) indeed lure more buyers back to the market, that could increase competition and drive prices higher. Flexibility and financial preparedness, says Vernon, are “must-haves” for successfully navigating a competitive housing market.

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Home prices will rise, but by less

While trends in home prices naturally vary by city and even neighborhood, prices are generally higher than during the pandemic, even in cities whose markets are experiencing a cooling.

The good news is the rate by which prices are rising appears to be slowing down. According to data from listing site Realtor.com, the median listing price in February was $415,500, an increase of just 0.3% compared to February 2023.

There’s also been a seeming uptick in sellers' willingness to offer price cuts. According to Realtor.com, over 14% of available homes had a reduction in listing price in February. That’s the highest rate since 2019 and a signal that more sellers are now open to negotiation to finalize a sale.

That said, prices tend to increase as spring draws near, due to home sellers anticipating the seasonal increase in demand. So, even if prices are stabilizing overall, buyers in highly competitive markets could find themselves in bidding wars that push prices higher – and worsen affordability.

Inventory will be up

After years of dealing with a supply shortage, determined buyers may finally have more properties to choose from. According to year-over-year data from listing site Zillow, new listings increased by 21% in February, while total inventory is up by 12%.

Data from Redfin and Realtor.com, though less robust than that from Zillow, also point to double-digit gains in supply. The trend may be especially helpful to first-time home buyers. In some cities, there’s been a significant increase in the number of homes for sale under $350,000.

In short, it appears that more homeowners are deciding to sell this year. In turn, that increased supply could improve selection for home buyers and provide a check on rising home prices.

“We’re starting to see a modest rebound . . . in housing activity,” says Orphe Divounguy, Zillow’s senior macroeconomist. He adds that the presence of more homes on the market “bode[s] well” for the housing market in general.

Against these encouraging trends for buyers is the dearth of properties now on the market. Even a healthy increase in inventory will not be enough to compensate for a supply deficit that existed before the pandemic, became worse during the buying frenzy of 2021 and 2022, and was further exacerbated by sellers whose plans to move have been stymied by the high costs of mortgaging their next home.

The upshot: Buyers who find the right home at the right price shouldn’t dally long before making a move.

Home insurance will cost more

Anyone getting a mortgage has to get homeowners insurance—the mortgage lender requires it. This year, the cost of premiums is likely to play a larger role than usual in affordability, because rates increased by double-digit percentages in 2023.

Worse, you can’t rely on today’s high rates to stay where they are. Experts predict another 10% to 15% hike this year. That means prospective buyers will need to factor rising insurance costs into their determination of how much home they can afford to buy this spring.

According to Travis Hodges, managing director at digital insurance brokerage VIU by HUB, nearly 80% of homebuyers roll insurance costs into their mortgage. Including insurance payments in the home loan means the monthly payments will increase every time the premiums go up.

Hodges says buyers can “take more ownership” over the insurance process by shopping around and getting estimates of the cost of insurance to get a complete picture of how much money it will take to finance a home.

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Agent commissions are to change

This means there will be more transparency regarding how and by whom agent commissions are paid. While commissions have always been negotiable, the seller typically pays 5% to 6% of the sales price, split between their and the buyer’s agent. Now, sellers may be more willing to negotiate how much commission they’ll pay to sell their home—to their agent, and that of the buyer.

Sellers may choose to continue offering a split fee and pay full commission, offer a reduced commission or opt not to pay buyer agent commissions. The latter means the homebuyer may have to pay their agent out of pocket, negotiate on the home price to account for the change, or take some other action.

The requirement for buyer agreements will not become official until the deal takes effect, which is not expected until at least the middle of July. Still, such timing could mean the changes will loom over the peak sales period in late spring and early summer. Indeed, some realtors already have them in place.

The upshot: The new rules' impact on today’s housing market is that they bring “a lot of confusion and frustration to buyers . . . at a time when the market is already highly competitive,” says Bianca D’Alessio, founder of the Masters Division at Nest Seekers International.

While the settlement is creating a period of uncertainty, there is also a window of opportunity. Buyers and sellers, says D’Alessio, should “seize the opportunities available in the current market rather than waiting for the new rules to take effect.”

Buyers have been under intense pressure over the past two years as mortgage rates rose and inventory shrank. This spring and summer, the process of getting a new home, or selling your current property, will not be any less stressful, given the unusual degree of uncertainty in the market. But market players who are financially prepared and do their homework should be able to take advantage of an opportunity to buy or sell when it presents itself.

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