MARKET SHIFT : With sales, inventory slowing, home buyers are more demanding

While interest rates nudge higher, buyers seem to be finding more solid footing in this highly competitive real estate market.  

After a pandemic frenzy of real estate transactions, many home buyers are moving back to requesting home inspections. And they’re requesting home warranties for major appliances and systems, even while available home inventory continues to be in short supply. 

“In every market, occasionally people will waive inspections, but you want an environment where a buyer can make an educated decision. I feel like that is the shift the market is moving toward,” said Al Perry, president of Pennsylvania Association of Realtors. Perry is the managing partner of Century 21 Advantage Gold in Philadelphia. 

Buyers are starting to feel more confident, one of the reasons they’re beginning to ask for home inspections more often. 

In May, 2022, The Philadelphia Inquirer reported many home buyers that skipped inspections, rather than miss locking in a deal, risked costly problems after they’d purchased the property. 

From termites to roof damage – or worse, a failing foundation or other major systems – skipping or waiving home inspections was a byproduct of the pandemic’s wave of home buying and low mortgage interest rates. 

But along with a slowly restarting new home building market and resumed construction products, Perry said older sellers, who might have been thinking to make a move are holding off. Part of the reason cited include rising interest rates and limited choices for their next home purchase.  

“We under built [new homes] in the commonwealth, we don’t have people aging out like we used to, and interest rate increase is keeping some buyers on the sidelines,” Perry said. He expects pricings to remain stable, at least in the short term. 

Sales down and short supply  

According to Perry, sales are down from last year. Transactions are down 31%, January year over year, from 2022 to 2023. 

“Our listings are also down, too, so we’re down about 17% in listings,” he said. 

A six month supply of for-sale inventory is considered a balanced market. Currently available homes for sale continue to clock in a t about 2.6 months of market supply, Perry explained. 

“We’ve been working with short supply for a while. When a buyer sees something they like, they need to be actionable about it,” said Jodi Diego, vice president of Pennsylvania Association of Realtors District 6. She is also real estate agent with Howard Hanna Real Estate Services in Camp Hill. 

Stephanie Holladay, a Realtor with Coldwell Banker Realty in Camp Hill, Cumberland County, said the biggest real estate hurdle right now is lack of inventory to sell. 

“When Covid happened … the new build industry halted and some companies stopped production entirely. We’re trying to build up from that,” Holladay said. 

Interest rate increases have also changed the level and amount of home people can buy right now, she said.  

“I have a legal pad full of buyers with nothing [appropriate for the client] to buy,” Holladay said. 

She said projections for the industry indicate a possible return to “normal” by 2024. 

Buyers empowered 

With the medium house price as of January 2023 at $193.839 in Pennsylvania, Diego said the Greater Harrisburg area the median home price is slightly ahead of the commonwealth, at about $233,000. 

While buyers are finding a voice to request home warrantees, negotiate price and request inspections, sellers aren’t as keen to meet them, according to Perry. 

He noted it’s been challenging to find sellers willing to move toward buyer requests. 

“Buyers are not scared to ask (for items). At the end of the day the seller is looking for a clean cut offer,” Diego said. 

She said buyers are not scared to ask now – and risk a sale.   

Appliance and system warrantees 

A home warranty can be purchased by the buyer or the seller, and it can cover the purchase after the fact. Home warrantees are a popular incentive to the buyer, and can provide peace of mind to the seller.  

Before Covid a lot of sellers would purchase a home appliance or major system warranty like electrical or HVAC systems, she said.  

Now buyers are more interested in major appliance warranties, and are more direct about asking about – and for – them.  

“Things not covered by your home owners insurance can be purchased separately” for coverage, said Angie Miller a real estate broker at RE/MAX Premiere Services in Hershey, Dauphin County. 

Interest rates 

Miller said the impact of higher mortgage interest reduces current home buyer’s buying power but it’s “…not necessarily impacting sellers’ ability to sell properties.” 

That means a buyer may not be able to purchase as large a house, or in a higher priced neighborhood than when interest rates were lower. 

In January 2023, U.S. News and World Report reported home mortgage interest rates had jumped at a record shattering pace from January 2022. Then, a 30-year fixed rate could be had for as low as 3.22%. In January, 2023, the same money and term jumped to 6.42%. 

Recent rates are not close to the mortgage high interest seen by home buyers in 1981, when mortgage rates escalated to 18.63%. 

A 2.65% record low mortgage rate was set in January 2021, according to the U.S. News and World Report. 

According to Miller for those with recent low refinance rates they’re not asking so much if they still love the house.  

“Now they’re saying, ‘I love my interest rate,’” Miller said. 

The deal 

Miller said some home buyers in the Harrisburg area are asking for seller relief in the form of points to bring interest rates down. 

“In Greater Harrisburg, we are still in a seller’s market,” she said. 

While lower interest rates brought out scores of buyers bidding on a single property “…now it may be one to three, and they [sellers] are not giving many concessions,” Miller explained. 

“Buyers must be prepared and ready to go if they find something they like. We still have competing offer situations, which is very good for the seller,” Diego said.  

Prices are expected to stay on the rise. NAR forecasted prices to continue to use through 2030. 

When it comes to borrowing mortgage money Miller said the current market is more “normal” for interest rates. 

“What I’ve found in this market, especially with buyers and sellers, is we’re really managing their emotions, because through the past several years we had to. We’re helping people with major life decisions,” she said. 

Melinda Rizzo is a freelance writer