Mortgage rates around 7% are shrinking the pool of qualified buyers and making shoppers far more sensitive to price.
Sellers face more competition, with Redfin estimating there were 58% more sellers than buyers nationwide in August.
Pricing correctly from day one, improving a home's condition, and offering concessions — including help buying down the buyer's mortgage rate — can give sellers an edge.
Home sellers who grew accustomed to bidding wars and offers above the asking price are confronting a very different housing market, as mortgage rates move back to around 7%.
The average 30-year fixed mortgage rate jumped to 6.95% this week, according to Freddie Mac, while some daily measures have moved above 7%. Redfin reported a daily average of 7.24% on Sept. 16.
That's a problem for sellers because higher rates don't just make mortgages more expensive. They can knock potential buyers out of the market altogether.
Redfin reported that pending home sales for the four weeks ending Sept. 13 fell 3.5% from the previous week to their lowest level in nearly three years. Mortgage purchase applications were also 19% below a year earlier.
Meanwhile, buyers who remain in the market have more homes to choose from. Redfin estimates that sellers outnumbered buyers by 58% in August, the largest imbalance in its records.
That means sellers may have to work harder to get a buyer's attention.
Price may matter more than ever
Perhaps the biggest mistake in today's market is pricing a home based on what a neighbor received during the housing boom.
With a 7% mortgage, even a relatively small difference in price can have a noticeable impact on the buyer's monthly payment. Buyers are therefore more likely to compare properties closely and reject homes they consider overpriced.
Redfin recently reported that 21% of sellers were cutting their asking prices and said realistic pricing from the beginning is increasingly important.
Realtor.com has also found evidence that sellers are adjusting. In July, the median listing price was 2.4% lower than a year earlier, and sellers who needed to make price reductions were doing so sooner.
The lesson for sellers: An ambitious asking price designed to "leave room to negotiate" can backfire if the property sits on the market and buyers begin wondering what's wrong with it.
Buyers can afford to be picky
When buyers have plenty of choices, the condition of the property becomes more important.
A seller may gain an advantage by taking care of relatively inexpensive repairs before listing — touching up paint, fixing dripping faucets, replacing worn fixtures, and improving curb appeal.
Decluttering and professional-quality listing photos can also help a property make a stronger first impression.
Expensive remodeling projects are another matter. Sellers should carefully consider whether they are likely to recover the cost before installing a new kitchen or undertaking another major renovation solely to sell the house.
The objective isn't necessarily to make the house perfect. It's to prevent buyers from seeing a long list of additional expenses on top of an already expensive mortgage.
Consider helping with the buyer's mortgage
One of the most powerful negotiating tools may be a seller concession.
Instead of simply reducing the price, a seller could agree to pay some of the buyer's closing costs or contribute toward mortgage discount points that reduce the buyer's interest rate.
Concessions have already become much more common. Redfin reported that 46.2% of U.S. home sales in May included a seller concession, the highest May percentage in its records.
For a buyer focused primarily on the monthly payment, assistance that lowers the mortgage rate may sometimes be more attractive than an equivalent reduction in the purchase price. The exact benefit depends on the loan and lender, and limits can apply to seller contributions.
At 7%, mortgage rates aren't just a buyer's problem. They're a seller's problem, too.
The sellers with the greatest advantage may be those who recognize that quickly — pricing for today's market rather than yesterday's, presenting a move-in-ready property, and remaining willing to negotiate on the things buyers now value most.