Home sellers have had the edge over buyers in the U.S. housing market for the past few years, as limited inventory pushed prices sky-high and there was fierce competition for available homes. But a few factors are converging to give buyers reason to be optimistic for the first time in a long time.
General economic uncertainty and housing affordability have been holding buyers back, says Kara Ng, senior economist at Zillow, leading to a lackluster home buying season. With inventory up 17% year-over-year, there are now more homes on the market than at any time since 2019, according to Zillow data. While prices are still significantly higher than they were even a few years ago, home appreciation has been flatlining and interest rates are down slightly compared to a year ago. Sellers across the country are cutting prices.
Even with the price cuts, homes that sell so typically do so in 17 days, according to Zillow. While that may sound fairly fast, that’s about four days longer than a year ago, signaling a general slowdown.
And while many sellers held onto homes longer than they may have liked due to the rock-bottom interest rates of the Covid days, now many are realizing those won’t be returning any time soon. People who need to move for their jobs, family, or other reasons are out of wiggle room, meaning they are looking to sell even if they can’t get the same deal on a new home they did on their current one.
“A lot of them don’t have that luxury of waiting until the rates fall again,” says Ng. “Basically, sellers are returning. Buyers are not.”
That puts buyers into a better position than they’ve been in for years, and gives them the upper hand in some markets, particularly in market in Florida and Texas, says Ng, where there is plenty of inventory. Sellers are starting to make concessions: buyers may be able to ask for further price cuts, help paying for closing costs, or a mortgage rate buydown.
“Sellers need to work harder now, there’s more competition because there are more listings and more listings are lingering,” she says.
To be sure, it’s not all good news for buyers, and Ng notes the market is more evenly-balanced than it has been in recent years, rather than tilted in favor of buyers altogether. Though price appreciation is leveling out, the median earner can afford the typical home in only 11 major markets across the country, down from 39 markets five years ago, according to Zillow. Homes are so expensive now, a buyer needs to earn nearly $100,000 a year to comfortably afford the median home price of $369,000, another Zillow analysis finds.
These numbers reflect median home prices and salaries across the U.S.—and will be higher or lower in specific markets. Cleveland and Pittsburgh, for instance, are more affordable while San Jose and San Francisco are considerably more expensive.
Zillow’s Ng adds that sellers are still in a pretty good place financially. Many bought before the pandemic and locked in a once-in-a-lifetime mortgage rate. Many have been able to build up significant equity over the past few years. An increasing share are de-listing altogether, rather than cutting prices further.
“If there’s no life event driver, like they have to move for a job, we see that sometimes sellers look at the inventory building up and they go, okay, maybe this is not the year. I can wait another year,” she says. Those who do need to work for a job or because they are growing their family may choose to rent out their current home rather than sell it.
For those who are part of the lingering listings, Ng says to focus on making your listing stand out. “Boost screen appeal” with plenty of staged photos and 3D or video tours.