4 Housing Truths Buyers and Sellers Are Struggling to Face

Let the home buyer (and seller) beware -- of these misconceptions.

It's been a wild couple of years for the housing market. For starters, home values have climbed since the buying boom that started not long after the COVID-19 pandemic hit the U.S. in spring 2020. According to data from the Federal Reserve Bank of St. Louis, the median sale price for an American home in Q2 2020 was $322,600, compared to $454,900 for Q3 2022. That's a gain of nearly 29%.

Meanwhile, we've seen mortgage rates fluctuate from a low of 2.66% for a 30-year fixed-rate mortgage at the end of 2020 to more than double that in 2022. As of this writing, the rate for that 30-year fixed mortgage is 6.58%, per Freddie Mac.

It's perhaps not so surprising that in November 2022, Zillow got some interesting results in a survey of real estate agents. It sought to find out what misconceptions home sellers and buyers are hanging onto in this market, and what the housing truths actually are. If you're preparing to wade into the market as either a buyer or a seller, don't fall for these.

1. Buyers think prices will crash

Nearly half (46%) of agents surveyed noted that many buyers believe the market will crash and home prices will fall in a hurry. This hope is certainly understandable, especially if you've ever been a renter longing to buy a place of your own. If all you see are high prices on homes that are far outside the bounds of affordability, you'll likely wish for prices to fall so you can get on the property ladder sooner rather than later. Unfortunately, this is unlikely to happen.

TRUTH: Zillow's research suggests that prices will likely flatten over the next year, but not fall significantly. And there will probably not be a glut of homes on the market to help lower prices, either.

2. Sellers think they'll get multiple offers

Zillow's survey found that 81% of agents were dealing with sellers who assumed they'd get multiple offers for their homes, as was the case during the salad days of the seller's market in 2020 and 2021. That was a great time to be a home seller, but the tide is starting to turn against them thanks to higher mortgage rates.

TRUTH: Sellers must now put in the effort and spend the money to market their homes and ensure they're in the best possible shape to get a qualified and serious buyer. It's no longer enough to just hammer a "For Sale" sign into the front yard.

3. Buyers think they should wait for lower rates

More than one-third (34%) of agents surveyed stated that buyers believe they should wait for lower mortgage rates before buying. There's logic here -- after all, no one wants to pay 6%, 7%, or more for a mortgage. You need only plug your costs into a mortgage calculator to see how a higher rate will impact your costs over the life of the loan.

TRUTH: While it's not the best time to be a home buyer, you may find less competition from fellow buyers in this market, and can take the time to craft an offer that takes higher rates into consideration.

4. Sellers think they can price their homes high

Finally, Zillow found that a majority (79%) of agents worked with sellers who believed pricing their homes high would result in correspondingly higher offers. And 74% have sellers who don't think they'll need to reduce their asking prices. Unfortunately, the market has changed, and Zillow notes that 28% of sellers have had to cut their listing price (the highest percentage since 2018).

TRUTH: Sellers should price their homes fairly if they don't want them to just sit on the market -- 73% of the agents surveyed said that correct pricing is the most important seller strategy. Sellers should also be careful to avoid underpricing, as it could turn buyers off.

How can buyers and sellers cope?

We spent a long period of time in a seller's market, but now the market seems to be coming to a more balanced place. If you're hoping to sell your home soon, approach the process strategically, and don't expect offers to fly in as they might have a year ago when rates were much lower. And if you're wanting to buy, ensure that your finances (such as your credit) are in the best possible shape, and that you have truly considered (and can afford) all the costs of homeownership before taking the plunge. And get pre-approved for a mortgage before you start your search, as it will show you're a serious buyer. Both sellers and buyers alike can benefit from working with a good real estate agent, as they are truly the local experts for your housing market and can be a great ally for either selling or buying.