If you’ve been keeping an eye on the housing market over the past couple of years, you know sellers have had the upper hand. But is that going to shift now that inventory is growing? Here’s a breakdown of what you need to know. Are We Heading Into a Balanced Market?
A balanced market is generally defined as a market with about a five-to-seven-month supply of homes available for sale. In this type of market, neither buyers nor sellers have a clear advantage. Prices tend to stabilize, and there’s a healthier number of homes to choose from. And after many years when sellers had all the leverage, a more balanced market would be a welcome sight for people looking to move. The question is – is that really where the market is headed?
After starting the year with a three-month supply of homes nationally, inventory has increased to four months. That may not sound like a lot, but it means the market is getting closer to balanced – even though it’s not quite there yet. It’s important to note this increase in inventory is not leading to an oversupply that would cause a crash. Even with the growth lately, there’s still nowhere near enough supply for that to happen.
The graph below uses data from the National Association of Realtors (NAR) to give you an idea of where inventory has been in the past, and where it’s at today:
For now, this is still seller’s market territory – it’s just not as frenzied of a seller’s market as it’s been over the past few years. As Mark Fleming, Chief Economist at First American, says:
“The faster housing supply increases, the more affordability improves and the strength of a seller’s market wanes.”
Here’s how this shift impacts you and the market conditions you’ll face when you move. Lawrence Yun, Chief Economist at NAR, explains:
“Homes are sitting on the market a bit longer, and sellers are receiving fewer offers. More buyers are insisting on home inspections and appraisals, and inventory is definitively rising on a national basis.”
The graphs below use the latest data from NAR and Realtor.com to help show examples of these changes:
Homes Are Sitting on the Market Longer: Since more homes are on the market, they’re not selling quite as fast. For buyers, this means you may have more time to find the right home. For sellers, it’s important to price your house right if you want it to sell. If you don’t, buyers might choose better-priced options.
Sellers Are Receiving Fewer Offers: As a seller, you might need to be more flexible and willing to compromise on price or terms to close the deal. For buyers, you could start to face less intense competition since you have more options to choose from.
Fewer Buyers Are Waiving Inspections: As a buyer, you have more negotiation power now. And that’s why fewer buyers are waiving inspections. For sellers, this means you need to be ready to negotiate and address repair requests to keep the sale moving forward.
But this is just the national picture. The type of market you’re in is going to vary a lot based on how much inventory is available. So, lean on a local real estate agent for insight into how your area stacks up.
Whether you’re buying or selling, understanding how the market is changing gives you a big advantage. Your agent has the latest data and local insights, so you know exactly what’s happening and how to navigate it.
The real estate market is always changing, and it’s important to stay informed. Whether you’re buying or selling, understanding this shift toward a balanced market can help. If you have any questions or need expert advice, don’t hesitate to reach out.
If you’ve seen the news lately about home sellers slashing prices, it’s a great example of how headlines do more to terrify than clarify. Home prices aren’t declining and here’s what’s really happening with prices.
The bottom line is home prices are higher than they were a year ago at this time, and they’re expected to keep rising, just at a slower pace.
But a recent article from Redfin notes,
“Price Drops Hit Highest Level in 18 Months As High Rates Dampen Buyer Demand.”
And that might make you think prices are declining.
Now, while it’s true the latest report from Realtor.com also shows 16.6% of homes on the market had price reductions in May, which is up from 12.7% last May, that doesn’t mean overall home prices are falling.
The key is knowing the difference between the asking price and the sold price.
In essence, the asking price, also known as a listing price, is the amount a seller hopes to get for their home when they list it. In reality, sellers can’t just put any price tag on their house and expect it to sell for top dollar. Today’s buyers are savvy customers, and when they aren’t willing to pay a premium for a home because their budgets are strained by higher mortgage rates, sellers need to adjust. And that’s what’s happening right now.
Based on market factors and what offers that seller receives, that asking price can change. If a seller isn’t getting much foot traffic, you may see them revise the price and make an adjustment to reignite interest in the home – and sometimes that’s because they’ve overpriced it from the start. That’s where price reductions come in, and when you see “price drops” in a headline, it sounds like declining home prices.
Mike Simonsen, CEO and Founder of Altos Research, says:
“Not only is the share of homes with price cuts elevated compared to one year ago, but more price cuts are happening each week than last year.”
On the other hand, the final sold price is the amount a buyer actually pays when the transaction is complete.
Here’s the most important thing to note: Actual sold prices are still rising, and they’re expected to continue to do so at least over the next 5 years.
So, while there’s been an increase in price reductions recently, this doesn’t mean overall home values are declining. Instead, it’s a sign that demand is moderating. And, as a result, sellers are adjusting their expectations to align with today’s market reality.
Even with more price reductions, home values are still growing on an annual basis, as they do nearly every year in the housing market. According to the Federal Housing Finance Agency (FHFA), home prices went up 6.6% over the last year (see below):
This map shows how prices rose just about everywhere in the country, indicating the market is not in decline.
So, while seller price reductions are often a leading indicator that prices may moderate in the months ahead, which experts have been saying for a while is expected to happen, they aren’t necessarily reason for alarm. The same article from Redfin also states:
“. . .those metrics suggest sale-price growth could soften in the coming months as persistently high mortgage rates turn off homebuyers. For now, the median-home sale price is up 4.3% year over year to another record high. . .”
And with inventory as tight as it is today, price moderation is much more likely in upcoming months than price declines.
For buyers, more realistic asking prices mean a better chance of securing a home at a fair price. It also means you can enter the market with more confidence, knowing prices are stabilizing rather than continuing to skyrocket.
For sellers, understanding the need to adjust your asking price can lead to faster sales and fewer price negotiations. Setting a realistic price from the start can attract more serious buyers and lead to smoother transactions.
While the uptick in price reductions might seem troubling, it’s not a cause for concern. It reflects a market adjusting to new conditions. Home prices are continuing to grow, just at a more moderate pace.
Even though data shows inflation is cooling, a lot of people are still feeling the pinch on their wallets. And those high costs on everything from gas to groceries are fueling unnecessary concerns that more people are going to have trouble making their mortgage payments. But, does that mean there’s a big wave of foreclosures coming?
Here’s a look at why the data and Why a Foreclosure Wave Isn’t on the Horizon.
One of the main reasons there were so many foreclosures during the last housing crash was because relaxed lending standards made it easy for people to take out mortgages, even when they couldn’t show they’d be able to pay them back. At that time, lenders weren’t being as strict when looking at applicant credit scores, income levels, employment status, and debt-to-income ratio.
But since then, lending standards have gotten a whole lot tighter. Lenders became much more diligent when assessing applicants for home loans. And that means we’re seeing more qualified buyers who have less of a risk of defaulting on their loans.
That’s why data from Freddie Mac and Fannie Mae shows the number of homeowners who are seriously behind on their mortgage payments (known in the industry as delinquencies) has been declining for quite some time. Take a look at the graph below: 
What this means is that, not only are borrowers more qualified, but they’re also finding ways to navigate through their challenges, exploring their repayment options, or maybe even using the record amount of equity they have to sell and avoid foreclosure entirely.
Before there can be a significant rise in foreclosures, the number of people who can’t make their mortgage payments would need to rise significantly. But, since so many buyers are making their payments today and homeowners have so much equity built up, a wave of foreclosures isn’t likely.
Take it from Bill McBride of Calculated Risk – an expert on the housing market who, after closely following the data and market leading up to the crash, was able to see the foreclosure crisis coming in 2008. McBride says:
“We will NOT see a surge in foreclosures that would significantly impact house prices (as happened following the housing bubble) for two key reasons: 1) mortgage lending has been solid, and 2) most homeowners have substantial equity in their homes.”
If you’re worried about a potential foreclosure crisis, know there’s nothing in the data to suggest that’ll happen. Buyers are more qualified now, and that’s one reason why they’re not falling seriously behind on their mortgage payments.
As we move into the second half of 2024, here’s what experts say you should expect for home prices, mortgage rates, and home sales.
Home prices are forecasted to rise at a more normal pace. The graph below shows the latest forecasts from seven of the most trusted sources in the industry:
The reason for continued appreciation? The supply of homes for sale. Jessica Lautz, Deputy Chief Economist at the National Association of Realtors (NAR), explains:
“One thing that seems to be pretty solid is that home prices are going to continue to go up, and the reason is that we don’t have housing inventory.”
While inventory is up compared to the last couple of years, it’s still low overall. And because there still aren’t enough homes to go around, that’ll keep upward pressure on prices.
If you’re thinking of buying, the good news is you won’t have to deal with prices skyrocketing like they did during the pandemic. Just remember, prices aren’t expected to drop. They’ll continue climbing, just at a slower pace.
So, getting into the market sooner rather than later could still save you money in the long run. Plus, you can feel confident experts say your home will grow in value after you buy it.
One of the best pieces of news for both buyers and sellers is that mortgage rates are expected to come down a bit, according to Fannie Mae, the Mortgage Bankers Association (MBA), and NAR (see chart below):
When you buy, even a small drop in mortgage rates can make a big difference in your monthly payments. For sellers, lower rates will bring more buyers back into the market, which can help you sell faster and potentially at a higher price. Plus, it may help you get off the fence, if you’ve been hesitant to sell due to today’s rates.
For 2024, the number of home sales will be about the same as last year and may even rise slightly. The graph below compares the 2024 home sales forecasts from Fannie Mae, MBA, and NAR to the 4.8 million homes that sold last year:
The average of the three forecasts is about 5 million sales in 2024 – a small increase from 2023. Lawrence Yun, Chief Economist at NAR, explains why:
“Job gains, steady mortgage rates and the release of inventory from pent-up home sellers will lead to more sales.”
With more inventory available and mortgage rates expected to go down, a few more homes are expected to be sold this year compared to last year. This means more people will be able to move. Let’s work together to make sure you’re one of them.
If you have any questions or need help navigating the market, reach out.
Many homeowners looking to sell feel like they’re stuck between a rock and a hard place right now. Today’s mortgage rates are higher than the one they currently have on their home, and that’s making it harder to want to sell and make a move. Maybe you’re in the same boat. But what if there was a way to offset these higher borrowing costs? There is. Your Equity Could Make a Move Possible.
Think of equity as a simple math equation. Freddie Mac explains:
“. . . your home’s equity is the difference between how much your home is worth and how much you owe on your mortgage.”
Your equity grows as you pay down your loan over time and as home prices climb. And thanks to the rapid home price appreciation we saw in recent years, you probably have a whole lot more of it than you realize.
The latest from the Census and ATTOM shows more than two out of three homeowners have either completely paid off their mortgages (shown in green in the chart below) or have at least 50% equity (shown in blue in the chart below):
That means the majority of homeowners have a game-changing amount of equity right now.
After you sell your house, that equity can help you move without worrying as much about today’s mortgage rates. As Danielle Hale, Chief Economist for Realtor.com says:
“A consideration today’s homeowners should review is what their home equity picture looks like. With the typical home listing price up 40% from just five years ago, many home sellers are sitting on a healthy equity cushion. This means they are likely to walk away from a home sale with proceeds that they can use to offset the amount of borrowing needed for their next home purchase.”
To give you some examples, here are a few ways you can use equity to buy your next home:
Want to find out how much equity you have? To do that, you’ll need two things:
You can probably find the mortgage balance on your monthly mortgage statement. To understand the current market value of your house, you can pay hundreds of dollars for an appraisal, or you can contact a local real estate agent who will be able to present to you, at no charge, a professional equity assessment report (PEAR).
Once you’ve connected with a trusted local agent and run the numbers, you’re one step closer to making a move you may not have thought was realistic – all thanks to your equity.
If you want to find out how much equity you have and talk more about how it can make your next move possible, let’s connect. You can learn more about Selling Your Home and reach out to me to talk about the options.
