Sellers are Flooding the Home Market while Buyers Sit on their Hands…

For years, the housing market has been a seller’s playground, with soaring prices and high demand. However, a dramatic shift has occurred, drastically altering the landscape. The hottest pandemic-era housing markets are now grappling with an oversupply of listings and a lack of enthusiastic buyers.

Recent data from a prominent real estate brokerage indicates a drastic rise in available homes compared to the number of buyers. This trend has resulted in the largest gap in the housing market since at least 2013. Despite the surplus in listings, home sales have stagnated in many areas, especially across the Southeast and Southwest regions, where inventories have far exceeded pre-pandemic levels.

For instance, in Miami, the number of homes for sale in April was nearly three times the number of buyers. Industry professionals observe that sellers are increasingly forced to reduce their asking prices to appeal to tentative buyers. Jeff Lichtenstein, president of a real estate agency in Palm Beach Gardens, Florida, remarks, “There will be more price reductions, and more willingness to sell at a lower number, especially in the next couple of months. We’ve definitely seen people who have taken losses.”

This scenario marks a stark reversal for the Sunbelt area, which experienced significant home value increases and competitive bidding during the COVID years. Now, cities such as Atlanta, Austin, Phoenix, and Tampa are witnessing lengthy listings as issues like affordability challenges, elevated mortgage rates, and cautious buyer behavior come into play.

Although national home prices are continuing to rise, the rate of growth is declining. US prices climbed 1.4% in May from a year earlier, but this was down from 2% annual growth in April. In fact, twenty-four of the 100 largest metro areas recorded year-over-year price declines in May, primarily within the Sunbelt.

Dirk Lovelace, a homeowner in Tryon, NC, noted, “There’s not even usually a home for sale in our neighborhood, and I think there’s three or four right now.” Despite relocating to South Carolina and reducing his asking price, he still hasn’t received any offers. “The current sentiment is, the market’s probably going to go down further, so people are just waiting,” he added.

Buyers are in no hurry. Over the past five years, home prices have surged more than 50% nationwide, while mortgage rates remain high, exceeding 6.5%. Even though active listings in May reached their highest point since 2019, they are still approximately 14% below typical pre-pandemic levels.

The widening gap between buyers and sellers is partially due to homeowners listing properties out of necessity rather than opportunity. Some are relocating for job-related reasons, while others are divesting investment properties due to rising costs or the anticipation of price drops. Additionally, the increased cost of homes has made buyers hesitant to jump into the market.

According to a lead researcher, “It doesn’t feel like buyer demand is going to come back that much. Prices are just too high.” In Denver, agents observe a significant shift in buyer behavior. The immediate discussions are now centered around potential discounts and concessions, a notable departure from the urgency seen in previous years.

For home buyers like Carley and Garrett Kapelski, who previously paused their search due to market competition, the current conditions are less pressurizing. “We feel a lot less stressed this time,” Garrett Kapelski notes. He suggests that waiting out a few more months may reveal more flexibility among sellers who believed their homes would sell quickly.

Several factors have contributed to the current slowdown, including the recovery in housing supply since the 2006-2009 crash and the low mortgage rates from the pandemic era. However, this trend might be lessening. New-home construction has gained momentum post-pandemic, and more homeowners are beginning to list their properties, either due to urgent needs such as job transfers or family considerations. This shift offers a beacon of hope for revitalizing the balance between sellers and buyers in the housing market.