Economists Have a Strange New Buzzword for the Housing Market That Will Shock Buyers and Sellers
The housing market has been called plenty of things this summer: red-hot, insane, brutal. But the latest word du jour to describe the state of real estate today is almost shocking in its tepidness: balanced.
This term cropped up most recently in an analysis by Realtor.com economist Jiayi Xu, who notes, “Our weekly data suggests that the U.S. housing market keeps progressing toward a more balanced market.”
Many economists of late have remarked on the market’s more even-keel turn.
“Selling prices will level out as the market cools but this cooling is just a return to the type of balanced market that has been absent the past couple of years.”
– Greg McBride, chief financial analyst at Bankrate
“What goes up, must eventually moderate… As some buyers pull back from the market due to affordability and supply constraints and as new construction adds more supply, house prices will moderate, resulting in a more balanced housing market.”
– Mark Fleming, chief economist at First American
“The early 2022 enthusiasm that homeowners had toward selling is evaporating as the housing market rebalances.”
– Danielle Hale, Realtor.com chief economist
But what does a balanced housing market actually look like—and mean—for buyers and sellers?
In a nutshell, “balance” means that the raging seller’s market that’s dominated since the COVID-19 pandemic is slowly shifting—not into full buyer’s market territory, but toward a middle ground that puts buyers and sellers on more even footing.
But there’s more to it than just that, and our weekly column “How’s the Housing Market This Week?” can help shed light on these nuances by delving into the latest real estate statistics for the week ending Aug. 20.
Homes are lingering on the market longer
For the week ending Aug. 20, properties spent four extra days on the market compared with this time last year.
“For a fourth week in a row, homes are sitting on the market for a longer time than last year,” adds Xu. “As both buyers and sellers adjust to the rebalancing market, expectations shift, reducing the sense of urgency in the market and reinforcing the trend toward longer sale timelines.”
Home sellers are less eager to list
While today’s homebuyers are less gung-ho to sprint to the closing table, home sellers are also dragging their feet to the market. For the week ending Aug. 20, the number of new listings dropped by 12% from a year earlier.
“This week marks a seventh straight week of year-over-year declines in the number of new listings coming up for sale, and a second consecutive week with double-digit declines,” notes Xu.
This newfound reluctance to list not only means buyers have fewer fresh listings to peruse, but it could also throw the market’s rebalancing progress off-kilter.
“This pullback from sellers could slow the speed at which the housing market rebalances,” says Xu. “Buyers looking for more bargaining power may need patience.”
Home prices are still high
The deep irony in listing skittishness is this: Sellers still stand to make bank, since home prices continue to soar through the roof.
Currently, property asking prices clock in at a median of $449,000 nationwide. And for the week ending Aug. 20, home prices shot up by 14.4% over that same time period last year.
To give you a sense of how far this sum has come, prices have climbed by double-digit percentages for 36 weeks straight. As Xu points out, “Home equity remains at a record high.”
But the clock seems to be ticking, which means there’s some good news for buyers, too: Despite high home prices, Xu says, “more of the usual seasonal price slowdown is ahead.”
Mortgage rates are up
For the week ending Aug. 25, the average 30-year fixed-rate mortgage shot up to 5.55% from the previous week’s 5.13%, according to Freddie Mac.
This is grim news for buyers, since it means that financing a home today is much more expensive than it was a year earlier. As Xu puts it, “The costs of purchasing today’s typical home [is] up more than 50% compared to a year ago.”
And perhaps herein lies the reason behind sellers’ growing reluctance to list: If they have to buy a new home, it means they’ll have to lock in a new loan at today’s higher interest rates, which could quickly eat away at any windfall their home sale may bring. And so, as Xu points out, with “nearly three-quarters of today’s potential sellers also planning to buy another home, it seems that more homeowners are deciding to stay put.”
And maybe that’s not such a bad idea. Moving is not a process to be rushed, and a more deliberate, level-headed, and balanced housing market may do us all a world of good.
Article Courtesy of REALTOR.COM
By Judy Dutton / Aug 25, 2022