Cotality's Selma Hepp says sellers are flexible and discounts are up, but not every buyer can act
As November gets underway, a challenging fall housing market will soon give way to a traditionally slow time of the year once winter rolls around.
Barring rapidly improving market conditions, this winter could be another challenging one for brokers and originators. However, there are often opportunities hidden within every challenge, and this winter could provide some of that opportunity.
Data from Redfin last week noted that 21.5% of sellers were reducing their asking prices, an increase from 20.9% the year prior.
That gives brokers something to tell clients who are holding out, along with a few tools that can make a purchase work.
Selma Hepp (pictured top), chief economist at Cotality, said winter gives buyers an edge, though not every buyer can take advantage of it.
"I'm always of the opinion that winter is a good time for buyers because sellers are more flexible," Hepp told Mortgage Professional America.
Why winter favors buyers
Cotality's August Home Price Index showed single-family prices up 1.8% from a year earlier, though they slipped 0.1% from July. Cotality noted that the data largely reflects deals locked before the late-August jump in mortgage rates.
Its forecast projects month-over-month price declines through the winter. Annual appreciation is expected to reach 1.3% for 2026 and 1.7% by August 2027.
Sellers who can wait tend to pull their homes off the market in winter, Hepp said. But not every seller has that luxury, as life events mean a home sale cannot wait until spring.
"For those that have to sell, they're more likely to make deals," Hepp said.
There is more inventory on the market now, she said, which gives buyers more to choose from. Redfin's data for the four weeks ending Oct. 25 shows total supply creeping up, with homes for sale up 0.3% from a week earlier and months of supply at 4.5, up from 4 a year ago.
"There's definitely more discounts as well," Hepp said. "So that's working in favor of buyers, which is not necessarily always the case in a spring home buying season."
Redfin’s median sale price was down 0.1% from a year earlier, the second straight weekly decline after three years of increases.
Part of the hesitation is psychological, Hepp said. Younger buyers have never seen rates this high.
Waiting on rates has long worried Hepp, and this year has made her case. Rates rose instead of falling, as many had forecast late last year.
"Our narrative is changing, and we're saying, 'Hey, higher for longer,'" Hepp said. "In fact, you're probably not going to see low 6s next year."
If buyers do stop waiting, it won't show up in the current data. Spring numbers will be the first real test.
"I've always believed that waiting for rates is a very dangerous game, because you just look at what happened," Hepp said.
Tools to close the gap
Lenders are looking for ways to get buyers moving again, Hepp said. She pointed to two tools in particular.
"For a long time we're talking about builders giving rate buydowns," Hepp said. "Now, even on existing home sales, I'm hearing about rate buydowns. So, for folks that can afford that, that's an option. ARMs are on the up again. So, people are being creative."
Optimal Blue's September report bears that out for ARMs, which reached 14% of lock volume, the highest share in its data going back to 2019, up from 10.5% in August after hovering between 8% and 12% for some time.
Buyers and sellers are both hesitating, she said. She hopes tools like these get activity started.
"When you have such a loss of confidence on both ends, nothing happens," Hepp said. "If something starts moving, more things start moving. So if we could just see maybe buyers saying, ‘Hey, it's as good a time as any. Let me try with an ARM or let me try this alternative buydown.’"
The options are not open to everyone. Buydowns, in particular, work only for borrowers who can afford the cost.
"Buyers have more deals to be had," Hepp said. "That's also a silver lining, but it is more expensive. If you're a buyer in a market that is cash, or it has a lot of equity, you're putting a large down payment, you're in a more advantageous position than you've been in a long time."
The effect of higher rates depends on the price of the home, Hepp said, pointing to Oklahoma City, where she put the median near $300,000 against about $400,000 nationally. With 20% down on a home at that price, she said, a move from 6% to 7% is not a significant increase compared with a million-dollar home.
"From 6% to 7%, that really doesn't mean anything if they don't know how it changes their monthly payment in dollars," Hepp said.
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