By Margaret Heidenry
The housing market today remains in a hazy no man’s land, with neither buyer nor seller willing to surrender what little control they have.
Buyers face the dual enemies of high home prices and mortgage rates, which have been bouncing between 6% and 7% this year and ticked up this week to 6.5%, according to Freddie Mac.
Sellers bear their own hardships: a glut of competition. As buyers sit on the sidelines, homes for sale linger on the market, gathering dust and dashing sellers’ hopes of bidding wars and over-asking offers.
But there is some inkling of a power shift in the buyers vs. sellers battle, and it’s in favor of the team willing to take some action: buyers.
“Perhaps surprisingly, data suggests that many shoppers are still finding success in this challenging market, with the homeownership rate notching its highest fourth-quarter reading in over a decade of 65.9%,” says Realtor.com® Economist Jiayi Xu in her analysis of housing data for the week ending Feb. 18.
We’ll drill down into what the latest real estate statistics mean for homebuyers and sellers in this latest installment of “How’s the Housing Market This Week?”
Why homebuyers might have the upper hand
Buyers who can make it past the market’s affordability challenges can exploit what positives they have on their side—namely, homes galore.
Indeed, the number of homes for sale for the week ending Feb. 18 is notably higher, up 67% from one year ago. And that’s mainly because listings are sitting on the market longer.
And that ballooning inventory has resulted in sluggish year-over-year asking price growth of just 6.5%—the lowest pace since June 2020.
Sellers are likely pricing their homes lower in an attempt to stand out from the crowded marketplace.
And those softening prices spell an opportunity for buyers, who can use their power position to negotiate with desperate sellers for an even better home price to offset high mortgage rates.
“The balance is shifting toward those who are actively shopping,” says Xu.
Yet one downside for house hunters is that, while they have plenty of listings to peruse, many of them are stale, meaning they’ve been lingering online for months. As such, many buyers might have already picked over and passed on these clunkers already.
In fact, for the week ending Feb. 18, the number of fresh listings that have just hit the market—the lifeblood of a healthy real estate market—is down 18% compared with this same week a year earlier. This marks 33 consecutive weeks that fewer sellers have listed their homes, showing just how reluctant they are to face this strange new world.
A bright spot for home sellers
Although homeowners are less interested in selling than they were a year ago, there is a light at the end of the tunnel.
Homes spent 24 extra days on the market compared with a year earlier, marking 29 weeks that homes have been for sale longer. At first blush, this might seem like bad news for weary sellers. Yet it indicates that the market is course-correcting, which will ultimately be good for sellers and buyers alike.
“A slower market pace is really a return to what was normal before the [COVID-19] pandemic turned a long-term housing under-supply into scarcity on steroids,” says Xu.
So despite the days a home spends on the market hovering as high as 75 in January, that figure is still low compared with pre-pandemic averages.
“January sales data shows a continued decline in sales of existing homes, but at a slower pace,” says Xu. “While sales aren’t returning to pre-pandemic levels anytime soon, there are reasons to suspect that the worst of the downturn may be in the past.”