For the first time in years, buyers finally seem to be gaining the upper hand over sellers in the U.S. housing market, as listings surge all across the country. And yet, for many Americans trying to get on the property ladder, it hardly feels like a victory worth celebrating considering mortgage rates are still hovering around the 7 percent mark and prices are still nearing their pandemic peaks.
The truth is that, despite rising inventory and dwindling sales giving buyers more options and more negotiating power, the U.S. is not yet, technically, a buyer’s market.
“If you use months supply, the hallmark metric of whether or not we are in a buyer’s or seller’s market, we are not in a buyer’s market,” Danielle Hale, chief economist at Realtor.com, said in a statement shared with Newsweek.
The U.S. had 4.4 months supply in May—meaning that if homes sold at the current pace, buyers would go through the number of listings available in 4.4 months. Historically, a buyer’s market starts at six months supply.
“While some are calling this housing market a buyer’s market, I would say the market is shifting in a buyer-friendly direction. We’re moving from a pretty seller-friendly housing market to one with more balance,” Hale said.
Not a Buyer’s Market Yet, but Buyers Are Gaining Power
For Hale, the recent shifts in the U.S. housing market signals that the country is moving in favor of buyers—and under certain aspects is already behaving more like a buyer’s market than a seller’s one.
For one, inventory continues rising: in May, it was up 31.5 percent year-over-year, marking the 19th consecutive month of year-over-year inventory growth, though it remains 14 percent below pre-pandemic levels, according to data from Realtor.com.
Homes for sale on the market are now taking longer to sell, to the point that many sellers are increasingly offering price reductions in order to close a deal. In May, the typical U.S. home spent 51 days on the market, six days longer than the same time last year. It was the 14th straight month of homes taking longer to sell on a year-over-year basis.
In the same month, 19.1 percent of listings reported price cuts—the highest share for any May since at least July 2016, when Realtor.com started tracking data.
While home prices remained flat year-over-year in May, at $440,000, presenting an enduring challenge for buyers, those looking to purchase a home now have a chance to negotiate a better deal with sellers.
“Buyers can expect that they will not only have more options to choose from, but they will also have more time to consider their choices in a market with less competition from other shoppers,” Hale said.
“While in a seller’s market, buyers may have to be willing to forgo a lot of typical contract protections, in a buyer’s market, sellers are likely to be more open to negotiating on price and other contract terms as well.”
According to Hale, this year Americans are going to enjoy “the most buyer friendly summer in nine years,” as well as “the first ‘balanced’ housing market since 2016.”
The Last Time Buyers Had the Upper Hand
The U.S. housing market has seen sellers dominate over buyers for so long that many might have forgotten how it felt when the dynamics were reversed.
“The most recent span of a buyers’ market in housing came on the heels of the mid-2000s housing boom,” Hale said. “At one point, housing demand was so languid and home sales were so slow that months supply got very close to the one-year mark, at 11.9 months.”
In 2008, in the midst of the housing crash, the months supply averaged 10.4 months for the whole year, Hale said.
This scenario—an “extreme buyer’s market,” as Hale called it—is unlikely to repeat itself anytime soon due to the chronic underbuilding the country has experienced nationwide since the Great Recession.
“According to the Realtor.com housing supply report, we have a deficit of nearly 4 million homes nationwide,” Hale said.
“Of course, regional variation in construction means that the severity of shortage or recovery varies widely as well, and it’s possible that we’ll see some metro areas tip into buyer’s market territory even as the national picture is still fairly balanced and other metros remain in seller’s market territory,” she added.
“This means that buyers will want to pay specific attention to local trends in addition to the national context. That’s not necessarily a new or different feature of the housing market, but it’s one that I expect the current moment and near future to reinforce for both buyers and sellers.”
The Markets To Watch for Buyers
The markets that are expected to see the steepest price drops are those where inventory has surged the most recently—with Florida and Texas leading this slowdown.
Realtor.com expects listings rising all across the country but particularly in the South and West, where inventories are already higher.
These markets—including Phoenix, Tampa, Denver, Jacksonville and Austin—are already seeing the largest share of price cuts in the nation. Over 28 percent of listings in these metropolitan areas had their original asking price slashed by sellers last month, according to Realtor.com.
Realtor.com senior economist Jake Krimmel previously told Newsweek that “the key for price changes will be to track growing inventory and time on market, especially relative to their pre-pandemic levels when the market was more balanced.”
Markets with high inventory and where homes for sale spend longer time on market are more likely to see price corrections, Krimmel said. The Northeast and Midwest, which have seen lower levels of inventory growth, are likely to see more price stability this year.
The post Is the US Housing Market Finally Shifting Toward Buyers? appeared first on Newsweek.
