We all knew it was coming one day, and now it appears that day is here. The end of historically low mortgage rates has finally arrived, meaning that hope of locking in a 30-year-fixed rate under 2% is pretty much out the window.

With current rates pushing past the 4% mark, even teasing 5% or higher, many potential buyers are collectively freaking out. That dream of an extremely affordable mortgage payment? Gone. Or is it? Here’s the silver lining for buyers that no one seems to be talking about… yet.

With rates rising, new, existing, and pending home sales fell dramatically this past month when compared with a year ago, according to The Washington Post. In other words, sellers are starting to see the end of their bidding wars, where the winning bid has to come in tens of thousands or more over the asking price.

And Then The Asking Prices Dropped

With limited supply, combined with double-digit price hikes, sprinkled with skyrocketing mortgage rates, potential buyers are dropping out of the market in droves. It’s a course correction, a cooling if you will, that is starting to cause panic amongst sellers.

Their only reasonable response: drop their asking price. Substantially. As home sales drop nationwide, with The Census Bureau reporting new home sales down 12.6 percent in March of 2022 vs. March of 2021, sellers are left with no choice but to cut thousands, even tens of thousands, off the asking price of their listed properties.

Existing home sales are down too, with a 4.5% year-over-year decrease, according to a report from the National Association of Realtors (NAR). Pending sales are down as well, by 8.2% to be exact, and the market is only expected to struggle more as the calendar year ticks on.

Rising Rates Mean Cheaper Homes

Redfin released their own report recently, showing that the average monthly mortgage payment had ballooned by 39% when compared with last year’s numbers. The average 30-Year fixed mortgage currently sits at a 12-year high of 5.1%.

This situation has caused a decrease in mortgage applications, with a 17% drop in late April according to a separate report from the Mortgage Bankers Association. Competition amongst buyers over the past year reached a fevered pitch, with bidding wars becoming the norm.

That all stands to change as of today. Over the past 12-24 months, we’ve seen a shortage of supply when it comes to homes listed for sale. At the moment, buyers who can afford these new, higher mortgage rates are still competing for this small batch of listings.

Redfin Signals The End of Bidding Wars

As we moved into Spring this year, bidding wars have become less and less common. 65% of buyers working with Redfin agents in March had competing offers against theirs, representing a 2% downtick from the previous month.

This means that 35% of buyers, or over a third, had no competing offers. Bidding wars are becoming less and less common by the day. Homes are sitting on the MLS longer, with sellers worried these higher rates will bring less buyers. The good news is that qualifying borrowers may still be able to lock in rates under 4% by using the right rate comparison platform.

By the end of April, 14% of home sales sold under a substantial price drop, which was the highest number of reduced price listings since last November. It was also an 11% increase from the previous month, signaling a trend where more and more sellers are realizing they’re going to have to drop their asking prices if they want to sell their homes.

Buyers Dropping Out Means Less Competition

As we’ve already covered, less competition leads to lower asking prices on the properties folks are looking to buy. And not all mortgage rates are excruciatingly high at the moment, with some lenders still offering rates as low as 3.5% for qualifying buyers.

Factors that will come into play for buyers include credit score, employment history, verifiable income and assets, and debt-to-income ratio, also known as D.T.I. Keeping that number under 45% is key according to mortgage market experts.

Ultimately, the most important strategy to incorporate when applying for a mortgage is to get multiple quotes, compare the terms against each other, and see which lender’s offer works best for you. Take your time, talk to the experts, and when you’re ready, connect with a licensed Realtor in your area to get the process started.

After all, it’s a buyer’s market now.