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

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

That’s the headline of a new report from Redfin, a real estate brokerage owned by Redfin Rocket companies. The report cites specific data on the supply of homes for sale and the number of buyers who are actively searching.

There were an estimated 36.8% more sellers than buyers in October, according to Redfin, 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. Economists at the brokerage firm estimate that the last time a buyer’s market was stronger was in the years following the 2008 financial crisis, when home prices fell across the country.

“Of course, it is a buyer’s market only for those who can afford to buy, and many Americans have been priced out of the housing market as affordability erodes,” researchers at Redfin noted.

This is the crux of the problem. Is it really a buyer’s market, if a lot of buyers are still priced out and therefore not even looking?

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

“Real estate companies are on the front lines of the industry and see firsthand how housing affordability and local economic conditions impact their clients,” said Jessica Lautz, deputy chief economist at NAR.

Home prices continue to decline, but at least nationally, they remained 1.2% higher in September than a year earlier, according to Cotality. Prices are about 50% higher nationally than they were just five years ago, before the pandemic.

“Just like the K-shaped trend seen in overall consumer spending – driven largely by higher-income groups – potential low-income homebuyers are challenged by an uncertain labor market, slowing wage growth, and deteriorating financial conditions. This is leading to weak demand for homes and downward pressure on prices,” said Selma Heap, chief economist at Cotality.

Mortgage rates are down from recent highs, but are still double what they were in the early years of the pandemic, when they quickly became a seller’s market.

Cost remains the main hurdle to homebuying, with about 75 of the top 100 housing markets still considered overpriced, according to Quality.

And in Washington, D.C., which was hardest hit by the recent government shutdown, potential buyers — largely those not affected by the shutdown — have discovered that it is easier to get good deals.

“They realize they have leverage and find they can get concessions and price fixes,” said Paul Legere, a buyer’s agent with Keller Williams’ Joel Nelson Group, adding that “it feels as if this may be a short moment in time.”

The lockdown may be over, but consumer sentiment does not point to an increase in home buying. In its November survey, the National Association of Home Builders reported a decline in builders’ sales expectations over the next six months.

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