Home buyers face the twin enemies of high prices and mortgage rates. Mortgage rates have been rebounding between 6% and 7% this year, rising to 6.5% this week, according to Freddie Mac.
Sellers have their own difficulties: too much competition. As buyers sit on the sidelines, unsold homes sit on the market gathering dust, dashing sellers' hopes of fighting a price war and high asking prices.
But in the buyer-seller battle, there are signs of a power shift that favors the team willing to take some action: the buyer.
"Perhaps surprisingly, the data suggest that many shoppers are still finding success in this challenging market, with the home ownership rate reaching its highest level in more than a decade in the fourth quarter at 65.9 percent," said Realtor.com® economist Jiayi Xu in her analysis of housing data for the week ending February 18.
In the latest edition of "How's the Housing Market This Week? We'll delve into what the latest real estate statistics mean for home buyers and sellers.
Those buyers who can weather the affordability challenges of the market can take advantage of the positive factor they have, namely a large number of homes.
In fact, the number of homes for sale rose significantly in the week ending Feb. 18, up 67% from a year ago. This is mainly because listed companies are staying in the market longer.
Ballooning inventory led to a slow year-on-year increase in asking prices of 6.5%, the slowest pace since June 2020.
Sellers may lower their prices to try to stand out from a crowded market.
The softening is an opportunity for home buyers to use their position of power to negotiate higher prices with desperate sellers to offset the impact of high mortgage rates.
"The balance is tilting toward those who are actively shopping," Xu said.
One drawback for house hunters, however, is that while they have plenty of listings to peruse, many of them are out of date, meaning they have been online for months. As a result, many buyers may have picked up and given up on these old cars.
In fact, the number of new listings just coming on the market - the lifeblood of a healthy housing market - fell 18 percent in the week ending Feb. 18 from a year earlier. That marked 33 straight weeks of fewer sales, showing just how reluctant they are to face this strange new world.
Although owners are less interested in selling than they were a year ago, there is a glimmer of hope at the end of the tunnel.
Homes are spending an extra 24 days on the market compared with the same time last year, meaning homes are sitting on the market for 29 weeks longer. At first glance, this might seem like bad news for weary sellers. However, it shows that the market is reorienting and ultimately benefiting both buyers and sellers.
"The slowdown in market growth is actually a return to the normal level before the (COVID-19) pandemic, after the chronic undersupply of housing turned into scarcity of medicine," Xu said.
So while the number of days a home spent on the market hovered around 75 in January, it was still low compared to the pre-pandemic average.
"The January sales data showed that sales of existing homes continued to decline, but at a slower pace," Xu said. "While sales volumes will not return to pre-pandemic levels in the short term, there are reasons to suspect that the worst of the downturn may be over."
