Housing numbers point to strong buyer’s market. There’s a catch

This is the strongest buyer’s market for housing in more than a decade.

That’s the headline of a new report from Redfin, a real estate brokerage. Rocket Companies. The report points to specific data regarding the supply of homes for sale and the number of buyers actively searching.

According to Redfin, there were 36.8% more sellers than buyers in October; this was the largest difference on record dating back to 2013. Redfin defines a buyer’s market as a market where there are at least 10% more sellers than buyers. Economists at the brokerage predict that the last time there was a strong buyer’s market was in the years following the 2008 financial crisis, when home prices collapsed across the country.

“Of course, this is a buyer’s market only for those who can afford to buy; many Americans have been priced out of the housing market due to declining affordability,” Redfin researchers said.

And that’s the crux of the problem. Is it really a buyers’ market if so many buyers are still being priced out and therefore aren’t looking?

Real estate firms see housing affordability as the biggest challenge in their business, according to a new report from the National Association of Realtors. It far outweighs other challenges, including industry costs.

“Real estate firms are at the forefront of the industry and see firsthand how housing affordability and local economic conditions affect their customers,” said Jessica Lautz, NAR deputy chief economist.

House prices continue to weaken, but at least nationally they were 1.2% higher in September than a year earlier, according to Cotality. Nationally, prices are roughly 50% higher than they were just five years ago, before the pandemic.

“Similar to the K-shaped trend seen in overall consumer spending, driven largely by higher income groups, potential home buyers with lower incomes face challenges due to an uncertain job market, slow wage growth and deteriorating financial conditions. This is leading to weakening demand for homes and downward pressure on prices,” said Selma Hepp, chief economist at Cotality.

Mortgage rates have fallen from recent highs, but they are still roughly double what they were in the early years of the pandemic in what is quickly becoming a seller’s market.

Cost remains the main barrier to buying a home, with around 75 of the top 100 housing markets still considered overvalued, according to Cotality.

In Washington, D.C., which was hardest hit by the recent government shutdown, potential buyers (mostly those unaffected by the shutdown) are discovering that it’s easier to get good deals.

“They understand they have usage rights and they understand they can ask for price reductions and repairs,” said Paul Legere, a purchasing agent for Keller Williams’ Joel Nelson Group, adding that it “feels like a fleeting moment.”

The shutdown may be over, but consumer confidence does not indicate an increase in home buying. In a November sentiment survey, the National Association of Home Builders reported declining sales expectations for builders over the next six months.

“We continue to see demand-side weakness as the labor market softens and consumer finances contribute to a difficult selling environment,” said NAHB Chief Economist Robert Dietz.