The Housing Market Is Shifting Almost Everywhere — But Are We in a Buyer's Market Yet?
By now, you’re probably aware the housing market’s changing. But is it a “buyer’s market” just yet? That depends on who you ask — and, more importantly, where they’re located.
At its core, real estate is a local game. While you can make certain generalizations about the housing market as a whole — like “rates are rising,” for example — when it comes to calling things in favor of buyers, sellers or neither (in the case of a balanced market), it depends on the unique supply and demand factors of any given area.
Take Manhattan. A recent report from real estate analytics provider UrbanDigs said the borough’s housing market has officially “ticked down into buyer's market territory for the first time since late 2020/early 2021.” Supply is up, demand has waned considerably, and pending sales have slumped back to 2019 levels.
Fayetteville, North Carolina, on the other hand, is still a “seller stronghold,” according to homeownership platform Knock.com. There, homes are selling in just seven days, on average, and nearly 1,200 homes were sold in August — a 56% uptick compared to a year earlier.
“The conditions buyers face depend on where they’re shopping — more so than has been the case over the past couple of years,” says Danielle Hale, chief economist at Realtor.com. “Some of the markets that had been the most competitive have turned in the other direction and are seeing the biggest adjustment.”
She’s right: Knock’s data shows that many of the pandemic’s hottest markets — places like Salt Lake City, Phoenix and Boise — are now among the most favorable for buyers, marking a stark about-face from just a few months ago.
Despite these outliers, the list of definitive “buyer's markets” is pretty small right now — but that doesn’t mean things won’t change. How will you know when the scales have tipped in your area? Pros say there are a few signs to watch for.
Signs you’re in a buyer's market
Anyone who’s shopped for a home in the last few years knows what a seller’s market looks like. Listings are few and far between. Homes sell at lightning speed. And when you do find a great place, you’re up against a dozen other buyers — forced to outdo and outspend.
Buyer's markets are just the opposite. Instead, supply outweighs demand, giving home shoppers the upper hand — both when hunting for a home and when negotiating for it.
“One of the main indicators is inventory — how many homes are currently active on the market,” says Christine Hansen, broker-owner of CENTURY 21 Hansen Realty in Fort Lauderdale, Florida.
Look to San Francisco — the top buyer’s market in the country, according to Knock.com — as a great example. There, the number of active listings is hovering around 6,000 a month. At the start of the year? Only about 2,000 homes were listed for sale.
Greg Hriso, a real estate agent with Homie Colorado, says there are other signs you can look for, too.
“Sellers offer more incentives, such as [contributing to buyers’] closing costs, and are willing to take more contingencies than in the past,” he says. Additionally, “Homes take longer to sell, and [price] appreciation slows or even drops a little.”
Again, San Francisco is case in point. In August, it took 24 days for the typical San Fran home to sell — double the time seen last year. Home prices have also slipped steadily since May and are now down 5% compared to last August.
If you’re not seeing similar happenings in your market just yet, don’t fret. Pros say the shift from a seller’s market to a buyer's one is usually gradual. Conditions change incrementally, and eventually, the market flips.
As Hansen explains, “There is some lag time between a seller’s market and a buyer’s market. It’s kind of like playing catch-up.”
Buyers have it better than a few months ago
Fortunately, if you’re in a spot that’s not definitively favoring buyers yet, there should still be a few things easing the pressure on home shoppers — at least compared to a few months ago.
For one, higher mortgage rates — which have shrunk affordability significantly in recent months — are whittling down the competition just about everywhere.
“The rapid rise in interest rates has sharply reduced the number of potential homebuyers,” says Cristin DeRitis, deputy chief economist at Moody’s Analytics. As a result, “Buyers today can expect to face less competition than they would have last year or even six months ago.”
That’s a great thing if you’re still on the house hunt, as it means fewer bidding wars and less feverish negotiations. You probably won’t need to bid way over asking price or waive vital contingencies — which allow you to back out due to home inspection findings, a low appraisal or your loan falling through — just to get noticed.
“The demand frenzy witnessed in the first two quarters of 2022 is no longer,” says Karen Kostiw, an agent with Coldwell Banker Warburg. “Sellers are no longer demanding that buyers eliminate contingency clauses from the contract.”
There’s also a general slowdown that tends to happen every fall, Hale says — another advantage for today’s home shoppers. Typically, buyers pull back as they near the holidays or sign their next lease (October marks the end of peak rental season). Homes also sit on the market longer, leaving sellers more motivated than at other points in the year.
“This year, the market is still relatively competitive, but it has shifted out of the most intense conditions that we saw in 2021 and in a buyer-friendly direction,” Hale says. “That means that this fall's seasonal break for buyers is particularly helpful.”
Strategies for buying right now
Buyers shopping in today’s changing market will likely have more leverage than they’re used to — but conditions won’t be perfect. Fortunately, agents say there are a few strategies that can help ensure success.
First, don’t feel pressured to make snap decisions — but do act with some level of urgency. While bidding wars are no longer the norm in most areas, you can still expect to face competition.
“I've found that as soon as one person is interested, another will come out of the wings and make an offer,” says Allison Timothy, an agent with Homie Utah. “I always advise my buyers to assume there are other eyes on the property no matter what the general market may look like.”
You can make more demands than you could have a few months ago, like including contingencies or asking the seller to contribute to your closing costs. If today’s near-7% mortgage rates are eating into your budget, you can also ask the seller to buy down your interest rate — essentially making a lump-sum payment to your lender, reducing your interest rate (and payment) for the first few years of the loan.
Just don’t expect to get everything — or at least get it easily. As DeRitis puts it, you “shouldn’t necessarily expect that any offer you make will be instantly accepted.”
Finally, if you’re sitting on the sidelines hoping for prices to fall considerably, don’t wait too long.
“Homes in good condition remain in demand,” Kostiw says. “While prices are down in certain price points and areas, there will not be a falling knife.”
More from Money:
Why the Fall Housing Market Won't Be Great for Buyers — or Sellers
5 Reasons Home Sales Keep Falling Through — and How Sellers Can Prevent It