Is there finally a buyer’s market for homes? or even a market that is balanced? Most of the cards still belong to the sellers. Good news, though, is that the inventory situation may not be as bad as it first appears. A nice difference from the extremely competitive market of recent years is that buyers now have more negotiating power and leverage over sellers.

 

What kind of market do we operate in (buyers or sellers)?

 

Using the months-of-supply criteria, the housing market is sometimes classified as a seller’s market, a buyer’s market, or a balanced market. The months-of-supply indicator shows how long it would take, at the current rate of house sales activity, for the inventory that is now on the market to sell. 

Usually, it is determined by dividing the month’s final active listings by the average monthly sales volume for the previous 12 months. In the past, a seller’s market was defined as having less than five or six months of supply, while a buyer’s market was defined as having more than six months of supply.

 

 A market that had enough supply for five or six months was considered to be in equilibrium.

Indicating a strong seller’s market, there was around 3.5 months’ worth of supply nationwide at the end of 2022. The months-of-supply indicator considers the pace of home sales from the previous 12 months, a time when mortgage rates were still around 3% and homes were still flying off the market, so this measure may be understating the amount of supply that is available. 

 

The existing inventory would take longer to draw down and the months-of-supply measure would be higher, possibly even in “balanced” territory, if a more usual (that is, lower) rate of monthly sales was utilized.

 

How are the vendors responding?

The amount that sellers must now give is far higher than it was in the previous few years. The national average sold-to-list price ratio was above 100 for the majority of 2021 and 2022, which indicates that homeowners frequently received more for their home than the asking price. The average sold-to-list price ratio fell below 100 for the first time in 18 months in September 2022. Multiple offers and bidding conflicts are no longer seen by sellers. Instead, in order to sell their house, owners must accept offers below the list price.

Another evidence that buyers have increased clout is the reintroduction of seller concessions, which all but vanished in 2021. For instance, in the fourth quarter of 2022, more than 40% of deals in the Washington, D.C., area market contained a seller concession.

 

What ought a potential buyer to do?

Many purchasers who were on the sidelines towards the end of 2022 are now looking to enter the market as mortgage rates have stabilized. Customers looking to buy a property will find the market to be much less competitive than it has been due to growing inventory and greater options for haggling.

 

Inventory is still limited, for both buyers and sellers. In the event that a buyer finds a home they adore, they should be ready to submit an offer. A successful house purchase will still depend on having pre-approved financing and being willing to be flexible with closing dates. On the plus side, purchasers should request contingencies for house appraisal and inspection, and in this emerging market they might even be eligible for some closing cost help.