4 Clear Signs This Raging Seller’s Market Has Peaked—and a Buyer’s Market May Be Slowly Moving In

4 Clear Signs This Raging Seller’s Market Has Peaked—and a Buyer’s Market May Be Slowly Moving In

Lisa Johnson Mandell

 

4 Clear Signs This Raging Seller’s Market Has Peaked—and a Buyer’s Market May Be Slowly Moving In

Buying a home today has become a bit of a blood sport, rife with bidding wars pushing offers well over the asking price as buyers scramble to land a house.

It’s been hard, we won’t lie. But every seller’s market does eventually have an end. Now, it appears that in certain areas, the market pendulum might slowly but surely be swinging back in a buyer’s market direction.

In order to discern a shift, however small, from a seller’s to a buyer’s market in your area, let’s first take a look at what defines those buying/selling environments.

What is a seller’s market?

To put it simply, a seller’s market happens when there are more homebuyers than sellers. Based on the basic law of supply and demand, this means that sellers have the upper hand and can sell their homes quicker, at higher prices, with little pushback from buyers.

There are many conditions that have upheld the current seller’s market, which was gaining momentum even before the COVID-19 pandemic pushed it into overdrive.

“Even though the number of homes being built has been growing over the past 10 years, it hasn’t kept pace with population growth,” says Daren Blomquist, senior vice president at RealtyTrac.

And the pandemic didn’t help, bringing in a wave of new buyers in the early days snapping up available inventory, and later supply chain issues and labor shortages made it even more difficult for builders to meet the demand for new homes. As a result, home sellers have seen unprecedented benefits and profits—they have been the group in the driver’s seat.

What is a buyer’s market?

Remember the days when the price on real estate listings was just a hopeful suggestion, and buyers could often get away with offering below that price rather than tens of thousands of dollars more? And while we’re at it, remember when you could see a home and take some time to decide whether it was right for you? That, dear friends, is a buyer’s market.

Going back to the law of supply and demand, it’s what happens when the number of homes for sale surpasses the number of people looking to purchase them. In a buyer’s market, houses take longer to sell and sometimes owners even offer incentives, like paying for a home warranty policy or even throwing in a budget for painting and repairing.

Signs a seller’s market may be shifting toward a buyer’s market

We don’t want to get homebuyers’ hopes up too high just yet, but there are some indicators that certain sectors of the housing market may be adjusting slightly in favor of buyers. Time will tell, as it always does, but we thought we’d take a look at some signs that today’s raging seller’s market may be shifting.

1. More homes are becoming available

There is some real cause of buyer optimism here: The Realtor.com June Housing Report shows an uptick in the number of homes for sale for the second straight month. In fact, the number of listings in June grew by 18.7% compared with a year earlier—and that’s the largest margin in the data’s history.

“The biggest positive for buyers is that they’re seeing more homes on the market now,” says Realtor.com Chief Economist Danielle Hale. “This means more options for them to consider in their home search.”

Inventory increased in 39 of the 50 largest U.S. metros compared with last year. Among the cities that saw the most inventory growth are Austin, TX (+135.4%), Raleigh, NC (+112.4%), and Phoenix (+106.7%). You’ll note that all of these markets experienced a booming seller’s market during the pandemic.

“The gains in inventory are welcome news for buyers who are now starting to see a few more listings come onto the market during their home search,” says Nick Bailey, president and CEO of Re/Max. “Options in multi- and single-family housing are there that weren’t available just a few short months ago. Affordability remains a concern, but homebuyers are regaining some control, which has been long overdue.”

Tim Yee, president and broker of Re/Max Gold in the Bay Area (where some of the greatest inventory shortages have traditionally existed), expects inventory to continue to improve over time.

“It appears that the long-forecasted market shift has arrived in the Bay Area,” he says. “Inventory is starting to increase, and the extraordinary rate of rising prices of the last few years seems to have mellowed somewhat.”

But he cautions homebuyers to keep their hopes realistic.

“This is not the dramatic change that some have predicted, but rather a cooling down of what was a sizzling market,” he says.

To learn more about the trends and latest information via monthly reports, head to Realtor.com/research.

2. Homes take longer to sell

When homes linger on the market longer, it is typically a sign that buyers are not as desperate to buy them—and sellers have lost some leverage.

Realtor.com research indicates that, on a national level, in June the typical home spent 31 days on the market—five fewer days than the same time last year. That’s not great from a buyer’s perspective, but the good news is that this frenzied pace is showing some signs of a slowdown in certain places.

In June, the number of days on the market for listings increased compared with a year earlier in nine of the 50 largest metros, including Detroit, Austin, and Denver.

To get a snapshot of what’s going on in your area, head to Realtor.com/local, where you can see the number of homes for sale in your area, how quickly they’re selling, and more.

3. Price reductions are on the upswing

Overall, U.S. housing prices are still rising. The median national home price for listings grew to a new all-time high of $450,000 in June, up 16.9% compared with last year. Home prices decreased in only three of the top 50 markets in June: Rockford, IL (-1.0%); Topeka, KS (-1.9%), and Cape Girardeau, MO-IL (-2.0%).

But there is some hope to be found in the fact that the number of price reductions on homes is increasing. In other words, homes might be listed high, but they’re having to be reduced in order to sell.

The June Realtor.com report shows that 14.9% of listings slashed their price that month, nearly double the percentage that had done so a year earlier. Homes in Austin, Phoenix, and Las Vegas saw the biggest growth in price cuts, indicating that some sellers have yet to adjust their expectations to this new reality.

4. Mortgage applications drop

It’s simple: The fewer people applying for mortgages, the fewer buyers there are willing to make an offer on a home.

In the first two weeks of July, “Mortgage applications declined for the second straight week,” reports Joel Kan, associate vice president of economic and industry forecasting at the Mortgage Bankers Association. “Purchase applications for both conventional and government loans continue to be weaker due to the combination of much higher mortgage rates and the worsening economic outlook.”

“Higher interest rates are making borrowing costs more expensive,” explains Realtor.com Economic Research Manager George Ratiu. “As rates jumped from about 3.1% in December 2021 to 6.0% in June 2022, the typical monthly mortgage payment surged over 60% higher than last year.”

As a result, “Some buyers have had to adjust their home search and still others have had to put their plans on hold,” adds Hale.

Nonetheless, for buyers with deeper pocketbooks and more wiggle room, there is an upside: With fewer buyers out there and a greater supply of homes, they will have a lot more leverage with sellers than they had before.

To find out which way mortgage applications are flowing when you’re looking for a home, you can get updates on the latest national mortgage trends at Realtor.com/mortgage.

Source: Realtor.com

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