Redfin real estate market research and survey reports have found that more than 60,000 house deals fell through during August 2022. This means that 14.9% of homes went under contract. In the previous months of May and April, the rates were 12.7% and 11.2%, respectively.
There is a steep rise and hardly any indication of a slowdown. The rates rise every day, and homebuyers are pulling out of set deals. Reports say this is the maximum number of contract cancellations since the beginning of the pandemic.
Even during the peak pandemic times, home sales were not this low because the mortgage rates were really low. Many real estate investors took these opportunities and bought houses. But the present real estate markets have become extremely volatile and are making investors second guess before entering the market.
So, what are the factors causing this?
Why are homebuyers canceling deals?
There are multiple reasons why more and more homebuyers in America are pulling out of deals and canceling at the last moment. What are these? Check them out below.
Higher and unaffordable mortgage rates
The mortgage rates in the USA constantly fluctuate, and the rates are increasing on most days. This leads to most dream houses of homebuyers becoming unaffordable. When the mortgage rates rise, the loan amount that homebuyers were previously eligible for also falls through. Money lenders also refuse to make payments, and the deal gets canceled at the last moment.
According to Bankrate’s reports, the 30-year mortgage rate is at 5.59 % at present. In contrast, this value had gone down below 3 % during the pandemic and had pushed up house sales. The Fed raised its interest rates to tackle the rising inflation. As a ripple effect, mortgage rates saw a steep rise, making most houses unaffordable for average Americans.
Rising inflation rates
According to the US Inflation Calculator reports, the inflation rates in July were at 8.5%, whereas the rates in June were at 9.1%. That was one of the highest since 1981. The inflation rates are rising every day and have been one of the highest in the last four decades. But the income and economic transactions of people are not rising this fast. So, most people can no longer afford the house they wish; hence, many are pulling out of deals.
The economic slowdown due to pandemic
During the pandemic, there were more than 16.9 million unemployed people in the USA. According to Bureau of Labor Statistics governmental data, more than 57% of them were laid off during the pandemic alone. Most of their employers closed down due to lack of work, or some even filed for bankruptcy and closed shop, leading to these huge unemployment rates.
Many Americans are still out of jobs after the pandemic, or some are still working with pay cuts causing a serious economic slowdown. Even if some of these people had made deals on their dream houses, they are pulling out due to low income and rising prices. Though the government provided a lot of aid to support these people, this aid is never enough for people to invest in a house.
Rising home prices
According to the US News reports, though the sale of houses in the USA is going down due to multiple reasons, housing prices are still really high. In May 2022, the price rose more than 20%. Another US News report said that the sale of existing homes fell by 5.4% during June alone. The rising prices and increasing inflation are pushing people to get out of deals at the last moment.
How can you strategize to make sales during these times?
The times are tough for any real estate owner, be it commercial or residential. Housing prices are constantly increasing. The inflation rate is also rising, and mortgage rates are rising, whereas average income is going down. This makes housing quite unaffordable for average Americans.
But if you are a real estate business owner, you need to plan your strategy and leadership in a way that you can stay afloat even in this volatile market. Here are a few tips to get on with the process.
Offer incentives
Send personalized offers to your valuable customers and potential leads. Make them feel valued, and show them listings within their budget or offers they can not refuse. Why? McKinsey data has found that personalized offers are the key to making people buy more. 76% of consumers said personalized communication makes them like a brand much more. 78% personalized content makes them repurchase from brands. And 78% of them are ready to recommend brands to others for personalized offers and content.
Bring in that added personalization and customization of all your listings and pay individual attention to each customer to make them buy.
Offer buyers something extra than just properties
Add a little extra to each property you want to sell or rent out. What can this be? Send personalized gifts on customers' birthdays/anniversaries. Offer furnished apartments for a lower price, or give a community tour to potential buyers. You can also help them with additional information about related property issues, like finding utility products around the community.
You can also start writing educational blogs about the services you provide and your properties. This extra effort will provide a little something extra for your customers. It will make the property buying process a humane and holistic one rather than just a mechanical sales deal.
Get the Right Advisory Solutions with Assetsoft
If you do not have an effective project management system and marketing strategy, and leadership plans, then your business can easily go down a slippery slope.
To not let this volatile market make your business suffer, help us help you stay afloat amidst all turmoils. We can take care of the strategy and leadership work while you take care of the other core matters of business. Know more - contact us today!