Balance Is Returning to America’s Home Market

By: Kaydee Ambas · May 09, 2024 · Reading Time: 3 minutes

Shifting Balance

It’s been a tough year for homebuyers. With interest rates at a multi-decade high, homeowners have had little incentive to list their houses, as that would likely mean buying a new home themselves and locking in a high mortgage rate. This in turn weighed heavily on inventory across the U.S. With fewer houses for sale, more people competed for each listing, and many sellers secured attractive terms from desperate buyers hoping to own their dream home at any cost.

But that all may be set to change this summer.

Power Pendulum

Home sellers no longer hold all the power in real estate transactions. Although the current housing market isn’t ideal for buyers, it’s becoming less attractive for sellers, too. Demand for existing homes is declining, which means the inventory crunch is finally showing signs of softening. With less competition, prospective buyers are able to hold out for better terms.

Long gone are the low-interest days of the pandemic, when home sellers could sit back and entertain dozens of offers as buyers rushed to take advantage of low mortgage rates. Today, the 30-year fixed-rate mortgage is over 7% — more than doubled from when it was under 3% in 2021. And persistent inflation has tempered hopes that the Federal Reserve will lower rates anytime soon.

With this in mind, Americans looking to move may be unable to wait for more favorable rates to list their homes, affording more negotiating power to buyers.

A New Market

Although inventory appears to be recovering, it remains relatively low. From 2020 to 2022, there were well over 6 million existing homes sold each month. Today, that number has fallen to roughly 4 million. This means sellers likely won’t have trouble finding interested buyers. But the decreased competition and tepid demand means they may have to make more accommodations during the negotiation process, like price cuts, making repairs, or paying for closing costs.

This shift likely doesn’t represent a crashing real estate market, but simply a more balanced one.

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