Mortgage demand hits a two-decade low. Here's how buyers can benefit now.
While the housing market seemed unstoppable in recent years, the Federal Reserve's rate hikes over the last 18 months have put quite a damper on things. Not only are mortgage rates at the highest point in 23 years, but mortgage demand is now at the lowest level in 28 years, according to new Mortgage Bankers Association data.
What this trend indicates is that many potential homebuyers are holding off on buying a home right now. And, if you're one of them, you may want to rethink that strategy — even with mortgage rates hovering around 7.5% right now. While the decline in mortgage demand may seem concerning, the fact that there are fewer buyers in the market for a home could result in some big benefits for the buyers who stick around.
Explore the mortgage rates you could qualify for here.
How homebuyers can benefit from low mortgage demand
The decline in mortgage demand offers several advantages for potential homebuyers, including:
Reduced competition
When mortgage rates are elevated, many would-be buyers will wait to see if rates decline before purchasing a home — which is precisely what we're seeing right now. And, fewer buyers in the market mean less competition for available properties.
This can alleviate some of the stress associated with bidding wars and multiple offers, which many potential people were facing during the home buying process earlier this year (and in the years prior). It also means that buyers may be able to take a little more time finding their dream home, as they're less likely to miss out by waiting a day or two to make an offer.
Learn more about today's top mortgage rates here.
More inventory
The slowdown in demand also means that there's more likely to be a diverse inventory of homes available to buyers. That's because many buyers are choosing to wait for mortgage rates to decline, and qualifying for a loan is also more difficult when rates are elevated.
While inventory levels are still low in many markets, fewer buyers are flocking to the available homes. In turn, properties are more likely to sit on the market for longer, giving buyers a broader range of options and increasing their chances of finding the perfect home.
Increased negotiating power
With decreased demand for homes, the buyers who are still in the market for a home may have more negotiating power. At the height of the home buying frenzy, many sellers were unwilling to consider offers that were lower than asking — and seller concessions, like money for closing costs or repairs, were nearly nonexistent in many markets.
But with the lower demand for mortgages — and higher likelihood of reduced competition — sellers may now be willing to consider lower offers or contribute to closing costs, giving buyers a financial edge.
More time for due diligence
When the real estate market is competitive, many sellers expect potential buyers to waive inspections, appraisals and other contingencies as part of their offers. This isn't the best route to take for buyers, who could end up finding big problems with the home after purchasing.
But right now there's a lot less pressure to move quickly or make these types of concessions to get an offer accepted. In turn, buyers have more time for due diligence. They can thoroughly research properties, neighborhoods and financing options to ensure they make the best choice for their financial future.
The bottom line
This nearly three-decade low in mortgage demand presents a unique opportunity for prospective homebuyers. With increased negotiating power, a diverse inventory of homes, reduced competition and more time for due diligence, buyers could have the upper hand in today's real estate market.
However, it's essential to approach the homebuying process with care and diligence. Conduct thorough research, budget wisely and work closely with a knowledgeable lender to make the most of this opportunity. By doing so, you can turn this decline in mortgage demand into an opportunity to finally secure the home of your dreams.
