By Margaret Heidenry May 31, 2024
Not a day seems to go by without a housing market headline breaking down a new set of real estate data: Mortgage rates soar above 7%! Home prices drop! Housing stock hits a four-year high!
Homebuyers and sellers might get whiplash trying to figure out what it means for them.
But, it is possible to figure out who is in the driver’s seat in the real estate market.
Sometimes, it’s the seller. Once in a blue moon, buyers will be in control or the market is balanced. And, believe it or not—often neither buyers nor sellers are in control. When the latter happens, it’s called a “nobody market,” a “limbo market,” or even “purgatory.”
The current market indicates that it’s sellers who hold the advantage, although by a slim margin.
“The market is still leaning toward a seller’s market, but has gained balance since the red-hot [COVID-19] pandemic,” says Realtor.com® senior economic research analyst Hannah Jones.
Buyer vs. seller: What determines the market?
The data that decides who holds pole position in the market generally hinges on the total supply of homes and the demand for them.
A glut of listing pages offering loads of well-priced homes for sale indicate a buyer’s market. A housing market with old or scant housing stock means sellers have the leverage.
If there is more than a five-month supply of homes available, it’s a seller’s market. A five- to seven-month supply of homes indicates that it is a balanced market. Anything more than a seven-month supply of homes means it’s a buyer’s market.
As of April, housing supply data showed that new- and existing-home sales and overall housing stock levels were at a four-month mark. That’s the highest they have been in March since 2019.
While that’s good news for buyers, the total housing supply was still down a whopping 35.9% in April compared with what typical levels were from 2017 to 2019.
“New-home inventory is benefiting overall home supply, pushing the market toward more balance,” says Jones. “However, it is important to note that only about 1 in every 5 new homes for sale is completed. This means that though the data suggests considerable new-home supply, many of these homes are not move-in ready.”
When was the last buyer’s market?
Do you remember when the first “Avengers” movie came out and the year London hosted the Olympics? That was the year buyers held an advantage.
“The last … buyer’s market was in early 2012,” says Jones. Back then, housing stock was a little over a seven-month supply, meaning it’s been 12 years since supply outweighed demand.
But right now, Realtor.com Chief Economist Danielle Hale says the market is moving “toward balance” with more than a five-month supply of homes, a market not seen since early 2019.
Why this seller’s market is complicated
Though it is better to be a seller than a buyer in today’s market, it is also challenging to be a seller.
“Most sellers hold a mortgage with a lower rate than today’s rate, so selling would mean not only potentially purchasing into a higher-priced market, but also taking on a higher-rate mortgage,” says Jones. “So, though today’s market conditions are more favorable for sellers, it is challenging whether on the buy or sell side.”
Sellers, like buyers, also face higher listing prices. In April, home prices hit a median of $430,000.
High home prices and mortgage rates mean sellers have to seriously weigh the pros and cons of selling a home “despite being on the more favorable side of the transaction as a seller,” as Jones puts it.
Why the housing market can feel like ‘purgatory’
So why is the housing market so confusing to both sellers and buyers alike right now?
There’s a “conflict between raw data and the way buyers and sellers likely feel about the market,” Hale says.
She compares the economic data versus the recent consumer confidence numbers.
“Although people are spending and the economy is growing and unemployment is low, people don’t feel great about the economy,” she adds.
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