'I live with blue and green tiles': apartment buyers compromise in order to calm the housing market

Multiple first-day offers may be a thing of the past, but high mortgage rates, limited inventory and erosion of affordability still force buyers to make most trade-offs.
"They're looking for smaller homes compared to what they were on the market for last year," says Heather Mahmoud-Corley, a Redfin real estate agent in Phoenix, Arizona. "They have to go further from the city center so they can afford more than they want."
Items on the "must list" also fell by the wayside.
No more pools. Forget the extra bedroom.
For others, it cuts into their lifestyle.
"I've had clients tell me they won't eat out as much," she says. "The purchase of the new car is pending."
So far, higher rates have not caused house prices to fall, at least not by much. While prices are falling from their peak levels in the summer of 2022 in most parts of the country, the National Association of Realtors reported that the January median home price in the country rose 1.3%, compared to a year ago. In some local markets, prices are still rising at almost double-digit rates.
Mortgage rates are still more than double what they were at the beginning of last year. This prevents many home sellers from trading up due to low lock-in mortgage rates.
The lack of inventory in some markets has meant that prices are still holding up and even rising in some markets.
In Westchester County, New York, for example, where inventory fell 19% from last February, the median home price rose 2.4% in January compared to the same period last year.
In Scarsdale, where entry-level homes can range from $1 million to $1.4 million, buyers have become less picky, says Kamala Vital, a real estate agent with Julia BP/Sotheby's.
Vitale, who has managed extensive remodeling projects including layoffs, says buyers are increasingly willing to take on remodeling projects.
“At $1.4 million last year, they would have expected it to have upgraded bathrooms. But now they say, 'You know what? It's OK. Even if it's blue and green bathroom tiles, I'll live with it and improve it over time," she says. "I am often asked for renovation advice."
The average mortgage rate is nearly three percentage points higher than it was at this time last year, and the typical homebuyer's monthly payment is up nearly $700, an increase of more than 40 percent, says Bright MLS Chief Economist Lisa Strutbant.
At today's rates, home prices would have to drop 30 percent for median-priced homebuyers to make the same monthly payment as they did a year ago, she said.
The median sales price of existing homes in January rose 1.3 percent from a year ago to $359,000, according to the National Association of Realtors.
While prices have fallen from summer highs and price growth has slowed significantly, the national median house price is slightly higher than it was in early 2022.
Furnished homes, which come at high prices, are off the average buyer's list, says Mahmoud-Korli.
"To save on property costs, buyers know they will be looking at a house that needs some work," she says. "Where they're going to have to invest some equity to get into this house that they can't get into otherwise."