The Buyer's Market
This is the strongest buyer's market in housing in more than a decade, according to a new Redfin report.
There were 36.8% more sellers than buyers in October. That's the largest gap in records dating back to 2013.
Redfin defines a buyer's market as one with at least 10% more sellers than buyers. The last time there was a stronger buyer's market was after the 2008 financial crisis.
The Affordability Problem
"Of course, it's only a buyer's market for those who can afford to buy," Redfin researchers noted. "Many Americans have been priced out of the housing market."
That's the crux of the issue. Is it really a buyer's market if so many buyers are still priced out and not even looking?
Real estate firms cite affordability as their biggest business challenge. It far outweighs other issues, according to the National Association of Realtors.
The Price Situation
Home prices are weakening but still 1.2% higher in September from a year earlier, according to Cotality. Prices are roughly 50% higher nationally than five years ago pre-pandemic.
About 75 of the top 100 housing markets are still considered overvalued.
Mortgage rates have come off recent highs. But they're still roughly twice what they were in the pandemic's first years.
The Income Split
"Much like the K-shaped trend seen in overall consumer spending, lower-income potential homebuyers are facing challenges," said Selma Hepp, Cotality's chief economist.
An uncertain job market, sluggish wage growth, and worsening financial conditions are leading to weaker demand and downward pressure on prices.
DC Sees Opportunity
In Washington DC, which was hit hard by the recent government shutdown, potential buyers are finding it easier to get good deals.
"They are figuring out they have leverage and are finding they can seek price concessions and repairs," said Paul Legere, a buyer's agent with Keller Williams. It "feels like it might be a short moment in time."
The Outlook
Consumer sentiment isn't pointing to a surge in homebuying. The National Association of Home Builders reported a drop in builder sales expectations over the next six months.
"We continue to see demand-side weakness as a softening labor market and stretched consumer finances are contributing to a difficult sales environment," said NAHB Chief Economist Robert Dietz.
The Bottom Line
Housing shows the strongest buyer's market in over a decade with sellers outnumbering buyers by 37%, but high prices and mortgage rates keep many potential buyers priced out despite the favorable conditions.