Is the U.S. Housing Market Finally Shifting Towards Buyers?
For the first time in years, there’s a noticeable shift in the U.S. housing market, with buyers beginning to regain some power against sellers. However, for many hopeful homeowners looking to step onto the property ladder, this change may not feel as rewarding as it sounds. Mortgage rates continue to hover around the 7% mark, and home prices remain close to the peaks observed during the pandemic.
Despite a rising inventory and a decline in sales—which theoretically gives buyers more options—the U.S. is not officially in a buyer’s market yet. According to Danielle Hale, chief economist at Realtor.com, "If we assess based on months of supply, the hallmark metric for determining a buyer’s or seller’s market, we are not quite there."
Understanding the Current Market Dynamics
What is Months Supply?
The U.S. housing market had a 4.4-month supply in May. This figure indicates that if homes sold at the current pace, the available listings would be exhausted in just over four months. Historically, a true buyer’s market begins at six months of supply. While some experts label the market as "buyer’s friendly," Hale emphasizes that it is shifting in a buyer-friendly direction: moving from a purely seller-friendly state towards a more balanced scenario.
Rising Inventory and Extended Selling Times
One of the main indicators of this transition is the 34% year-over-year rise in inventory as of May. Though it marks the 19th consecutive month of annual inventory growth, it’s still 14% below pre-pandemic levels, signaling a cautious optimism among potential buyers.
Homes are now taking longer to transact, leading to increased price reductions as sellers aim to close deals. In May, the average home spent 51 days on the market—six days longer than the previous year. Additionally, 19.1% of listings reported price cuts, the highest percentage for May since at least 2016, according to Realtor.com.
Buyers, rejoice! This opens up opportunities for better negotiations. "With more options available and less competitive pressure, buyers can take their time making a decision," notes Hale, highlighting the potential for enhanced contract negotiations as sellers become more accommodating.
A Glimpse into the Past: The Last Buyer’s Market
It’s been a long time since buyers dominated the U.S. housing market. The last significant buyer’s market followed the mid-2000s housing boom. According to Hale, during that period, housing demand dwindled to the extent that months of supply once approached nearly a year.
Reflecting on the housing crash of 2008, when the average months of supply was 10.4 for the entire year, Hale states, "Such extremes are unlikely to repeat soon, given that the nation faces a housing deficit of nearly 4 million homes."
Regional Variations Matter
Not all regions will experience these dynamics similarly. While the national market might be balanced, some metro areas may lean toward a buyer’s market. As Hale points out, "Buyers need to stay informed about local trends," as these can vary widely across the country.
Key Markets for Buyers to Watch
Particularly promising opportunities for buyers can be found in markets where inventory has surged recently, like Florida and Texas. Realtor.com expects listings to rise, particularly in the South and West, leading to more favorable conditions for buyers.
Cities such as Phoenix, Tampa, Denver, Jacksonville, and Austin are witnessing significant price reductions, with over 28% of listings in these metropolitan areas seeing their asking prices slashed last month.
As Realtor.com senior economist Jake Krimmel recently noted to Newsweek, "Monitoring increasing inventory and time on market relative to pre-pandemic levels is crucial."
Price corrections are more likely in markets with high inventory and extended selling times, whereas areas like the Northeast and Midwest are expected to maintain price stability due to lower inventory growth.
Conclusion: The Evolving Landscape of Home Buying
While the U.S. housing market may not strictly be a buyer’s market yet, it is undeniably beginning to tilt in a more favorable direction for buyers. With rising inventories, extended selling times, and increasing negotiation power, 2023 could be one of the most buyer-friendly summers we’ve seen in the past nine years.
As the landscape evolves, potential buyers should remain vigilant, paying close attention to local market trends to maximize their buying advantages.
