Contract Contingencies Are Returning for Home Buyers
Spiraling mortgage rates on top of record-high and still-rising home prices are leading many experts to predict the real estate market is on the verge of a correction—if it isn’t already in one. They anticipate home prices will flatten, or even go down a bit, in certain markets.
The result is that new buyers would be paying about 50% more for the same home compared with a year ago in their monthly mortgage bills. And that’s greatly diminishing the buying power of many Americans—especially during a time when inflation has hit a 40-year high, gas prices have spiked, and even rent levels are nationally hitting new highs.
However, experts don’t believe the market is in a bubble or a crash is in the cards, like during the Great Recession. The nation is still suffering from a housing shortage that has reached crisis proportions at a time when many millennials are reaching the age when they start to consider homeownership. That’s likely to keep prices high.
In addition, lenders are giving mortgages only to the most qualified borrowers. These buyers are less likely to wind up in foreclosure. And prices aren’t expected to plummet unless another wave of foreclosures and short sales sweeps through the nation.
The real estate market nationwide is slowly shifting back to a more normal market and may be a Buyers’ market in some areas. In the past couple of years buyers have removed contingencies to woo sellers and win bidding wars.
Price is becoming more negotiable and the need to waive contingencies is hopefully becoming a thing of the past.
As the market has started to shift toward a more neutral market, buyers are regaining some power again and able to use contingencies to better protect themselves. As the market shifts, even in red hot markets, more contingencies are likely to appear as part of the process.
Mortgage and inspection contingencies are likely to become more negotiable in included in contracts for the Buyer’s protection, but contracts contingent on the sale of your current home is still not in the cards for most buyers.