Are We Approaching a Balanced Housing Market?

If you’ve been monitoring the housing market in recent years, it’s clear that sellers have held the upper hand. But with inventory on the rise, could this be shifting? Let’s dive into what this might mean for the market.

What Exactly Is a Balanced Market? A balanced market is typically defined as one where there is about a five-to-seven-month supply of homes available. In such a market, neither buyers nor sellers have a distinct advantage. Prices tend to stabilize, and there are more homes for buyers to consider. After a prolonged period where sellers dominated, a more balanced market would be a welcome change for those looking to buy. But are we really heading in that direction?

At the beginning of the year, there was a three-month supply of homes nationwide. Now, inventory has increased to four months. While this may not seem like a dramatic change, it indicates that the market is slowly edging toward balance – though it’s not there yet. It’s important to understand that this rise in inventory doesn’t signal an oversupply that could lead to a market crash. Even with the recent increase, there still isn’t enough inventory to create such a scenario.

The graph below, using data from the National Association of Realtors (NAR), shows how inventory levels have changed over time and where they currently stand:

Current Market Conditions: A Shift, but Not a Drastic One For now, the market remains in seller’s territory – it’s just less intense than in previous years. Mark Fleming, Chief Economist at First American, puts it this way:

“The faster housing supply increases, the more affordability improves and the strength of a seller’s market wanes.”

What This Means for You and Your Move Here’s how these evolving conditions might affect you:

Lawrence Yun, Chief Economist at NAR, notes:

“Homes are staying on the market a bit longer, and sellers are getting fewer offers. More buyers are now insisting on home inspections and appraisals, and inventory is clearly rising on a national level.”

The following graphs, using the latest data from NAR and Realtor.com, illustrate these changes:

• Homes Are Staying on the Market Longer: With more homes available, properties aren’t selling as quickly. For buyers, this means more time to find the right home. For sellers, it’s crucial to price your home competitively to attract buyers. Otherwise, they may opt for better-priced alternatives.

• Sellers Are Receiving Fewer Offers: As a seller, you may need to be more flexible with pricing or terms to close the deal. For buyers, the increased inventory means you’ll likely face less competition and have more choices.

• Fewer Buyers Are Waiving Inspections: Buyers now have more leverage, leading to fewer instances of waiving inspections. Sellers should be prepared to negotiate and address repair requests to keep the transaction moving forward.

The Role of a Real Estate Agent Keep in mind that these trends are based on national data, and the market in your area may differ. That’s where a local real estate agent comes in. They can provide valuable insights into your specific market, helping you understand how these changes might impact your buying or selling strategy.

Bottom Line The housing market is constantly evolving, and staying informed is key. Whether you’re buying or selling, understanding the shift toward a more balanced market can give you an edge. If you have questions or need professional guidance, don’t hesitate to reach out.