More than 90% of outstanding mortgages are at less than 6% interest rate, which is a big reason why new home listings are down substantially. In fact, national resale inventory is approaching its lowest levels in more than 10 years. Even though affordability and interest rates are on everyone’s minds, the market is not as slow as you may think. Sell-through pace is 50% higher than in 2019—a year when new construction rose, home purchases increased, and affordability went up. Now it seems homes are either flying off the market or sitting for months, and some even delisting. Why the drastic delta? Home condition.
Determining the condition of homes encompasses four main components: datedness, wear and tear, quality, and appeal. Datedness refers to how modern, trendy, or out of fashion the design of the house is. Wear and tear is the general level of maintenance. Quality refers to the underlying status of the materials, finishes, and appliances. And appeal refers to the overall aesthetics of the property.
There’s an interesting correlation between the quality of homes and homes that are selling right now—and it’s exacerbated in today’s market. We all know the phrase “location, location, location,” and while that’s always important, home condition has emerged as a major determinant for home sales. Data shows buyers strongly prefer better-condition homes and they are willing to pay a premium for them. Here’s why.
Better-condition homes are insulated from market slowdowns
It’s important to note that nicer-condition homes typically sell faster than comparable homes in worse condition, regardless of how fast or slow the market is moving. However, when the market does slow down, nicer-condition homes don’t feel as much of the slowdown effect as their worse-condition peers. That’s because buyers are effectively ranking homes. In hot markets where buyers exceed sellers, all homes find a buyer quickly, but in slow markets where sellers exceed buyers, the least desirable homes suffer disproportionately.
So what’s happening right now? We’re in what I like to call a “tweener market”: It’s not as fast as 2021 and 2022, but faster than 2018 and 2019. In hot markets like the past two years, homes in better condition than comps were selling six days faster. But as the market has relatively cooled, homes in better condition are now selling nearly twice as fast, shortening the time on the market by 11 days.
Off the heels of the spring buying season, we’re entering a seasonal period where active listings start to tick up as new listings continue to accumulate. In markets where Opendoor operates, new home listings are up more than 2% in just the last three weeks of May. Despite the macro, seasonality trends still exist. More homes on the market means more competition for sellers, and home condition is a meaningful way to make your home stand out.
Buyers want turnkey homes
A new Opendoor survey found that close to 70% of buyers indicate wanting a turnkey home right now. With post-pandemic life in full swing, buyers have less time to dedicate to renovation projects. Plus, construction loans are costly in high-rate environments like today.
In fact, we found 67% of buyers don’t want to pay for remodeling or repairs. Yet, only 23% of sellers are willing to apply for credit for remodeling or repairs. On top of that, home renovation spending is predicted to drop from 16.3% down to 2.6% over the next year.
And this tracks with market data. According to our analysis, homes in better condition than their comparable homes get 40% more visits from agents in their first week listed on the MLS. On average, homes in better condition close at or above their list price nearly 10% more often than homes in worse condition.
Homeowners are more flexible with location
Historically speaking, location has been one of the top nonnegotiables on buyers’ wish lists. However, after the pandemic, that mindset has shifted. The number of remote workers in the next five years is expected to nearly double since pre-pandemic rates: By 2025, 36.2 million Americans will be remote, an increase of 16.8 million people.
And when you can work from anywhere, you can also live anywhere. As a result, buyers are expanding their search criteria, whether moving to a different state or even surrounding neighborhoods near larger metros. The average move distance has increased by 38% from 2019 to 2022.
Even with a great location, having a home in worse relative shape can make selling your home harder. So while location matters, it’s not everything: Home condition also materially impacts the selling speed.
For sellers who want to maximize price and minimize days sitting on the market, consider upgrades that will make your home more appealing. Replace outdated features that are no longer trendy or in fashion, like popcorn ceilings or fluorescent lighting. Invest in quality upgrades like premium appliances, cabinetry, and fixtures. Lastly, a fresh coat of paint goes a long way and can cover signs of wear and tear.
While everyone thinks about location, home condition is another important consideration that often gets overlooked when preparing your home for sale. As more rural and suburban areas have increased in popularity since the pandemic, the pool of “good location” homes has expanded. That’s a huge positive, creating more opportunities for homeowners. You can’t change the location of your home, but you can improve the condition.
Amit Arora is VP of investments at Opendoor.
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
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