In the dynamic world of real estate, headlines are constantly shifting: “Mortgage rates soar above 7%!”, “Home prices drop!”, “Housing stock hits a four-year high!”. These fluctuating reports can make it difficult for both homebuyers and sellers to understand the current landscape. However, by examining key data, we can discern who currently holds the advantage. Despite recent changes, the market still favors sellers, though balance is slowly being restored.
Current Overview
A Hint of Balance
The real estate market today continues to lean towards sellers, albeit less aggressively than during the red-hot COVID-19 pandemic period. As Realtor.com® senior economic research analyst Hannah Jones states, “The market is still leaning toward a seller’s market, but has gained balance since the pandemic.”
Key Factors Determining Market Control
The balance between buyers and sellers is primarily determined by the supply and demand of homes. In a buyer’s market, there is a surplus of homes, providing buyers with more options and bargaining power. Conversely, a seller’s market features limited housing stock, giving sellers the upper hand. Typically, a market with more than a five-month supply of homes indicates a seller’s benefit, a five- to seven-month supply signals a balanced market, and anything beyond seven months suggests a buyer’s market.
Current Housing Supply
As of April, the housing supply data showed that new- and existing-home sales, along with overall housing stock levels, were at a four-month mark—the highest since March 2019. While this is encouraging for buyers, the total housing supply remains 35.9% below typical levels observed from 2017 to 2019. New-home inventory is contributing positively to the overall home supply, edging closer to balance. However, it’s important to note that only about 1 in 5 new homes for sale is completed, meaning many of these homes are not move-in ready.
Historical Context and Trends
The Last Buyer’s Market
The last notable buyer’s market occurred in early 2012, a year marked by the release of the first “Avengers” movie and the London Olympics. At that time, the housing stock was slightly over a seven-month supply, highlighting a period where supply outweighed demand. Since then, the market has predominantly favored sellers. According to Realtor.com Chief Economist Danielle Hale, the market is now moving “toward balance” with more than a five-month supply of homes—a scenario not seen since early 2019.
Challenges for Sellers
Complicated Seller’s Market Dynamics
Even though today’s conditions favor sellers, selling a home is not without its challenges. Most sellers hold mortgages with lower rates than current rates, which means selling could lead to purchasing a higher-priced home and taking on a higher-rate mortgage. Additionally, high listing prices are a concern for both buyers and sellers. In April, the median home price hit $430,000. These high prices, coupled with elevated mortgage rates, force sellers to carefully consider the pros and cons of selling their property.
Feeling Like Market Purgatory
Real estate can often feel like a state of “purgatory” for both buyers and sellers due to conflicting signals from economic data and personal perceptions. Although the economy is growing, unemployment is low, and people are spending, consumer confidence remains low. This dissonance creates a confusing environment for those looking to buy or sell a home.
Conclusion
Navigating the current housing market requires staying informed about the latest data and understanding the nuanced balance between supply and demand. While the market still leans towards sellers, the gradual move toward balance offers hope for buyers as well.
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