Stuck in a Sellers' Market

The last few years have seen a great deal of volatility in the housing market. Buyers scrambled in the pandemic, mortgage rates spiked, and home prices peaked last summer. So why haven’t prices crashed back down?

Sellers have been able to keep prices fairly stable over the last several months because there is less competition. With fewer houses on the market, there’s less seller incentive to lower prices. According to Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), low inventory is limiting just how low prices will go:

“We simply don’t have enough inventory. Will some markets see a price decline? Yes. [But] with the supply not being there, the repeat of a 30 percent price decline is highly, highly unlikely.”

As the graph below shows, the number of available homes has been steadily decreasing for years, with new record lows consistently being broken:

That lack of available homes on the market is putting upward pressure on prices. Bankrate puts it like this:

“This ongoing lack of inventory explains why many buyers still have little choice but to bid up prices. And it also indicates that the supply-and-demand equation simply won’t allow a price crash in the near future.”

If more homes don’t come to the market, a lack of supply will keep prices from crashing, and, according to industry expert Rick Sharga, inventory isn’t likely to rise significantly this year:

“I believe that we’re likely to see low inventory continue to vex the housing market throughout 2023.”

The latest Existing Home Sales Report from the National Association of Realtors (NAR) shows housing supply is still astonishingly low. Today, we have a 2.6-month supply of homes at the current sales pace. Historically, a 6-month supply is necessary for a ‘normal’ or ‘neutral’ market in which there are enough homes available for active buyers (see graph below):

So what does a sellers’ market mean for buyers? It means fewer homes on the market, so if you see something you like, it’s best not to wait because another one like it may not come up again. It also means increased competition, with multiple offers being made on practically every property. If you want to be a competitive buyer, find a trusted real estate professional who knows the tricks and trends of your local market, so you can win the offer the first time you make one.

As for sellers in a sellers’ market, this is the ideal time to list your property, because you’re going to get the best price on your terms, and the likelihood of your house sitting on the market for too long is much lower than in a buyers’ market. If you’re looking to sell quickly and for top dollar, reach out to your local real estate agent today, and take advantage of the spring real estate boom.