Homebuyers, Sellers Have Plenty of Market Misconceptions

Amid a volatile and rapidly changing housing market, many homebuyers and home sellers have unrealistic expectations about their prospects, according to a Zillow survey of real estate agents.

The survey found many buyers and sellers believe the current volatility is temporary and that market conditions will fall back into their favor. The survey found among aspiring home buyers, the most common misconception (46%) is that home prices will fall significantly; while for sellers, the most common misconception (35%) is that despite the cooling market, bidding wars, offers above asking price and quick sales will return.

“Buyers may think it’s better to wait out the market, but in reality, there is more opportunity in this market than I have seen in the past five years if buyers approach real estate as a long-term investment, ” said Michael Perry, an agent who leads The Perry Group, Salt Lake City, Utah. “If prices or mortgage rates take a meaningful dip, all those sidelined buyers will likely come rushing back to the market, driving up competition and prices. If a buyer can purchase today, they have bargaining power, more options and more time to find the right home, instead of being rushed into a purchase they might regret.” 

Zillow research finds a rapid drop in home values is unlikely. Zillow’s home value forecast predicts a flattening of home values over the next year, with prices increasing 1.3% by September 2023. Fewer new listings will keep upward pressure on prices. Meanwhile, some housing economists believe mortgage rates are more likely to rise than to fall as inflation pressures remain strong.

The survey found buyers do appear to be taking advantage of today’s more favorable market. Nearly three in five agents say buyers are taking more time to consider a home (56%) and making offers below list price more often (55%). More than 40% of agents say today’s buyers are including more contingencies in their offers (43%), such as inspection and appraisal contingencies designed to protect buyers from unexpected costs. 

Sellers, meanwhile, may be holding onto outdated expectations. A vast majority of agents say it’s a common belief among sellers to expect multiple offers on their home (81%), a price above market value (79%), a quick sale (79%) and no need to cut their price (74%). 

“Sellers can no longer put a for-sale sign outside their home and expect the offers to pour in,” said Koby Sway, an agent with The Briley Team, Omaha, Neb.. “They have to roll up their sleeves and make necessary repairs and home improvements before listing their home for sale. And it’s more important than ever to get the pricing right when competing against other sellers for a smaller pool of buyers.” 

Nearly three in four agents said pricing a home correctly is the most important seller strategy (73%). Competitively priced listings are going under contract in 19 days nationwide, 10 days faster than they were prior to the pandemic, while other homes are lingering on the market a median of 54 days. More than a quarter of sellers have been forced to cut their home’s listing price (28%), the highest share since 2018.