Housing Market Flip Is This Your Chance to Snag a Deal?

Housing Market Tilts: Sellers Outnumber Buyers as Affordability Concerns Linger

The U.S. housing market is experiencing a notable shift, with sellers increasingly outnumbering prospective homebuyers. This imbalance, driven by high prices and elevated mortgage rates, is creating a unique landscape for both buyers and sellers.

According to a recent analysis by Redfin, as of April, there were nearly 34% more sellers than buyers actively participating in the market. This marks a significant change, with buyer activity reaching levels not seen since the early days of the pandemic in April 2020, and before that, not since 2013 when Redfin began tracking this data.

What does this mean for homebuyers?

• Less Competition: Fewer buyers translate to less competition for available listings.
• Negotiating Power: Sellers are now under greater pressure to reduce asking prices and offer concessions to attract buyers.

“The balance of power in the U.S. housing market has shifted toward buyers, but a lot of sellers have yet to see or accept the writing on the wall,” said Asad Khan, a senior economist at Redfin.
This is a significant departure from the frenzied market of recent years, where bidding wars and offers above asking price were commonplace.

Sluggish Sales Reflect the Shift

The buyer-seller imbalance is mirrored in home sales figures. Sales have been declining since 2022, coinciding with the rise in mortgage rates from pandemic-era lows. Last year, sales of previously occupied U.S. homes plummeted to their lowest level in nearly 30 years. April's sales pace was the slowest for that month since 2009.

The trend of sellers outnumbering buyers began in November 2023, when the average 30-year mortgage rate surged to nearly 8%, a 23-year high, according to Freddie Mac. This week, the average rate reached 6.89%, the highest since early February.

Key Figures at a Glance:

• 1.9 million: Number of sellers in April.
• 1.5 million: Number of prospective homebuyers in April.
• 490,041: The difference - fewer people in the market for a home relative to sellers.

A year ago, sellers outnumbered buyers by only 6.5%, while two years ago, buyers actually outnumbered sellers by 5.3%.

Sellers Adapt to the Changing Market

Faced with fewer potential buyers, some sellers are adjusting their strategies. Nearly 1 in 5 home listings had their price reduced last month, according to Realtor.com. Others are offering incentives, such as covering a buyer’s closing costs.

Redfin predicts that the growing imbalance between buyers and sellers will drive U.S. home prices 1% lower by the end of this year. Price declines have already been observed in several metro areas, including Dallas, Oakland, and Jacksonville.

Regional Disparities

The market with the largest gap between buyers and sellers is Miami, where sellers outnumber buyers by approximately 3 to 1. In contrast, Newark, New Jersey, presents the strongest seller’s market, with 47.1% fewer sellers than buyers.

Affordability Challenges Persist

Despite the shift towards a buyer's market, affordability remains a significant hurdle for many Americans. The median U.S. home sales price has soared by 53% over the past six years, outpacing wage growth significantly.

While inventory of previously occupied homes has increased, it remains below pre-pandemic levels and lacks properties affordable for many.

Before the pandemic, households earning $75,000 could afford nearly half of all homes on the market. As of March, only 21.2% of listings were affordable, according to the National Association of Realtors (NAR). NAR considers a home affordable if monthly payments don't exceed 30% of a household's monthly income.

“Without a significant boost in housing inventory at price points below $260,000, the path to homeownership will remain blocked for millions of Americans who are otherwise financially ready to buy,” the NAR report concludes.

Looking Ahead

The current housing market presents a complex picture. While the shift in power towards buyers offers opportunities for those who can afford to purchase a home, affordability challenges persist. A significant increase in affordable housing inventory is crucial to unlocking homeownership for a broader segment of the population, and for true market equilibrium to be established.

Tags: housing market, home sales, buyers market, sellers, mortgage rates, home prices, real estate, US housing, Redfin, home shoppers

Source: https://apnews.com/article/housing-market-real-estate-affordability-mortgage-rates-a8fad991e022d541c1ac4d95f78ccffa