A spate of recent housing market reports suggest that home buyers could be sitting in the catbird seat later in 2023. In fact, many cities across the U.S. are starting to experience buyer’s market-like conditions.
The short version is that there are more homes available to purchase, but fewer buyers in the market. If this trend continues, the rest of 2023 could be a very good time to buy a home.
Improving Conditions for Home Buyers in 2023
According to a series of recent real estate reports, the market is continuing to shift from favoring sellers to favoring buyers.
This is a complete reversal of where we were 12 to 18 months ago. Back then, buyers were engaged in the real estate equivalent of a foot race, waving their contingencies and making offers above the asking price.
Take the latest housing market update from Realtor.com for example. On March 2, the company published a report with housing market data for the nation’s 50 largest metro areas. Among other things, it provided further evidence of the ongoing shift toward buyer-friendly conditions.
In many major cities across the U.S., the total number of active real estate listings rose significantly over the past year. Some metro areas experienced greater than a 200% increase in the total number of property listings.
According to Danielle Hale, chief economist for Realtor.com:
“The number of homes for sale on the market is up significantly from a year ago … and homes are taking more than three weeks longer to sell than last year. With a smaller pool of buyers today and more competition from other homes on the market, homesellers will likely need to adjust their price expectations in the market this spring.”
There are many overlapping factors behind this shift. Most of them stem from the fact that there’s just not as much demand for homes today, compared to the past two years. So, let’s at three of the biggest reasons why the rest of 2023 could be a good time to buy a home in the U.S.
1. A major increase in active real estate listings
Within the past year or so, housing markets all across the country have experienced a sharp increase in the number of real estate listings. This is based on the Realtor.com report mentioned above, and others like it.
Ironically (or perhaps logically), many of the cities that were the hottest housing markets a couple of years ago are now cooling the fastest. These cities are also experiencing a huge increase in the number of real estate listings.
Austin, Dallas, Nashville, Raleigh and Tampa are good examples of this trend. All five of those metro areas experience more than a 200% increase in the number of active real estate listings, over the past 12 months. The Austin-Round Rock and the Raleigh-Cary metropolitan areas topped to the list, with a 330% and 300% increase in listings respectively.
Surprisingly, there hasn’t been a big surge in the number of new sellers entering the market, as you might suspect. Instead, the increase in listings has more to do with a decline in demand and a slower real estate market.
In short, there are fewer buyers looking for homes these days, so many properties end up sitting on the market longer and “piling up.” It’s a trend we haven’t seen for several years.
So that’s one reason why 2023 could be a good time to buy a house, especially in real estate markets like the five mentioned above. And it paves the way for the second trend that’s currently benefiting home buyers nationwide…
2. More negotiating leverage for buyers
In the previous quote from Realtor.com’s chief economist, Danielle Hale said that sellers are going to have to “adjust their price expectations” over the coming months. That’s putting it mildly.
A year and a half ago, sellers could list their homes at just about any price and have buyers lining up with offers in hand. Those were the days of bidding wars and frenzied real estate market activity.
But those days are gone.
For the rest of 2023, sellers will not only have to adjust their expectations, but also accept the fact that the market is starting to favor buyers. The overall pace of the market has slowed considerably over the past year. This is giving buyers more negotiating leverage than they’ve had for a while, while putting more pressure on sellers.
Homes are now sitting on the market longer than they were during 2021 and 2022. And here again, the formerly red-hot markets are the ones seeing the biggest slowdown.
In the Austin, Texas metro area, for example, the median number of “days on market” increased by 72 days over the past 12 months. That means it’s taking a lot longer to sell a home in the current market, compared to a year ago.
Similar trends can be seen all across the country. In fact, among the nation’s 50 largest metropolitan areas, all but three experienced an increase in the number of median days on market over the past year. These and other trends could give buyers more negotiating leverage throughout the rest of 2023.
3. More realistic home prices ahead
In many U.S. cities, home prices peaked during the second half of 2022 and have since declined. This trend can also be seen at the national level.
According to the latest data from Zillow, the nationwide median home price peaked at around $333,000 in August of last year. Since then, the median price point has declined for several months in a row.
This might be construed as a sign of market weakness. But in reality, it’s more of a normalization pattern.
During the early days of the pandemic, home prices across the U.S. began to surge like never before. Some cities experienced year-over-year price growth of more than 30%, which was unprecedented at the time. Prices rose at an unsustainable pace, pushing many would-be buyers out of the market entirely.
So, from a broader economic standpoint, it’s actually good to see prices starting to come down. And this is another reason why the rest of 2023 could be a good time to buy a home.
Generally speaking, home values in the U.S. tend to rise at a slow and steady pace. But every once in a while, we experience a steep spike in house values followed by a brief period of decline. We appear to be in that “period of decline” right now, and it could continue over the coming months.
This could give home buyers in many cities a chance to buy at the “bottom” of the market, with the potential for positive equity growth for many years thereafter.
Disclaimer: This article includes an outlook for the real estate market extending through the rest of 2023. Such views are the equivalent of an educated guess and should be treated as such. The Home Buying Institute makes no claims or assertions about future real estate market conditions.