Slowing demand and growing supply are changing the balance of power in the housing market
Home buyers have the most leverage over sellers in years.
The bidding wars of the past half decade are fading in many parts of the country. Instead, today’s buyers say they are finding sellers willing to lower prices or throw in extras to sweeten the deal. The average home is now changing hands for 2% less than the price on the listing, according to real-estate brokerage Redfin.
Behind the shifting power balance is a growing supply of homes on the market. New listings increased in January by almost 5% versus last year, according to Redfin. By one measure, there is more for-sale homes than at any point in six years.
At the same time, demand is easing because many would-be buyers are deciding not to purchase at today’s prices, which are up sharply from a few years ago.
That has meant less competition for buyers who need more space for growing families or who need new homes because of divorces or cross-country moves.
Ryan Duncan, 28, didn’t hesitate to negotiate when he bought an Austin, Texas, duplex for $507,000 in November. The closing price was $10,000 below ask. He plans to live on one side and rent out the other.
He knew the property had been on the market for more than three months and heard the owner was eager to cash out.
“It definitely feels like a buyer’s market to me,” he said.
A dearth of buyers has slowed down the housing market. U.S. existing-home sales fell 4.9% in January from the prior month to a seasonally adjusted annual rate of 4.08 million, the National Association of Realtors said Friday. Last year, home sales fell to the lowest level since 1995 for the second straight year.
And prices continue to trend higher. The national median existing-home price in January was $396,900, up 4.8% from a year ago.
Mortgage rates are just below 7%, adding hundreds or thousands of dollars to the monthly cost of homeownership from just a few years ago. The costs of insurance, property tax and homeowners association fees have all been rising briskly in many parts of the country.
New homes completed rose nearly 10% in January compared with a year ago, according to the Census Bureau.
The typical home sold in January was on the market for nearly two months, the longest period since February 2020, according to Redfin. As a result, many sellers are more willing to give concessions.
Sellers whose homes need repairs are more likely to accept offers below asking price, said Mark Barnes, a real-estate agent in Charleston, S.C. Many are seeing more for-sale signs in their neighborhoods and realizing they have to work harder to attract a buyer than they did a year ago, he said.
Recently, his clients had an offer accepted to buy a four-bedroom home for less than the asking price. The inspection revealed a need for a new HVAC system and repairs to the crawl space. Barnes helped his clients renegotiate the price $35,000 lower to $390,000. The seller, who had two prior deals fall through, accepted.
Omaha, Neb.-based Amy Schinco said sellers are increasingly willing to include personal items in the sale. The real-estate agent said a seller agreed to leave behind a piano, patio furniture and home-theater system at the request of her client, the buyer.
Several of the most buyer-friendly areas now are in Florida markets such as Miami and Fort Lauderdale, where rising home prices encouraged building, and a combination of high prices and mortgage rates, along with increasing insurance costs, have discouraged buying, said Chen Zhao, an economist at Redfin.
Dennis Bowers, a real-estate agent in Naples, Fla., said there is about 30% more inventory in his market now compared with last year.
Roughly three years ago, buyers had about a day to make an offer on a property. The market has slowed down considerably, and buyers now have time to negotiate and make an offer below the asking price. Homes that need flood insurance are more likely to sell at a discount, he said.
Many sellers are still expecting to get the same price their neighbors did during the pandemic. Their homes are sitting on the market for months, he said.
“Some sellers are living in a fantasy,” he said.
Still, buyers hunting for move-in ready homes in desirable school districts often face stiff competition and have little or no negotiating power.
Sellers in areas like Buffalo, N.Y., Worcester, Mass., and Grand Rapids, Mich., generally have more leverage at the moment. This is partly because fewer sellers tend to list their homes during the cold weather, said Redfin’s Zhao.
Scott and Michelle Paer made an offer on a four-bedroom move-in ready home in Wyckoff, N.J., for more than $100,000 over asking price. They thought they had a good shot, but the property got 26 other offers and sold for almost $300,000 over ask to a cash buyer for about $1.3 million.
“I always thought the biggest barrier of entry to buying a home was a down payment and being able to afford it,” said Scott, who offered to put 20% down. “But in this market, it is not enough.”
Still, for homes that need work, buyers are more hesitant.
Dan Farkas, 49, has seen more properties for sale now compared with November when he bought a duplex in suburban Columbus, Ohio, for $345,000.
He would like to buy another property to rent out, but said most of the properties currently listed need tens of thousands of dollars worth of repairs.
“It’s not good to spend $300,000 on a property at 7% interest and then throw $30,000 into renovations,” he said.
Source: wsj.com
