America’s housing market has been brutal on homebuyers for the past two years—but at long last, signs suggest that the worst of it might be over.
“How’s the Housing Market This Week?” is our weekly column where we deliver the most up-to-date statistics on the four big bellwethers of the housing market: home prices, number of new listings, total days on the market, and mortgage rates. And for the week ending Aug. 6, these critical variables show that the tables are turning in favor of homebuyers more than sellers.
“The housing market is resetting in a buyer-friendly direction,” notes Realtor.com® Chief Economist Danielle Hale in her analysis.
Granted, a “buyer-friendly direction” does not mean we are anywhere near a true-blue buyer’s market. The seller’s market that has raged since the COVID-19 pandemic is still going strong, but all signs say the clock is ticking and its days are numbered.
The surprisingly good news hiding in rising home prices
The latest July data from Realtor.com places the median home price nationwide at $449,000. And, for the week ending Aug. 6, listing prices rose by 15.5% over that same week last year.
While this marks the 34th straight week of double-digit price growth, the good news hiding within the bad is it’s also the “second consecutive week of deceleration,” points out Hale.
For the week ending July 23, home prices rose by 16.6%, followed by 15.6% the week ending July 30. So this week’s relatively temperate 15.5% hike offers hope that home price growth might continue dwindling.
“The improvement has been substantial,” says Hale. But she’s quick to point out that “buyers in today’s market may still face meaningful affordability challenges as the typical home listing price remains near a record high.”
Sticker shock, however, is not stopping truly determined house hunters from forging ahead.
“Persistent [homebuyers] may still continue to find success,” says Hale. “Second quarter data showed that homeownership rates increased from a year ago, both overall and for nearly every age and racial and ethnic group.”
The fact that homeownership rates have actually surged—amid rampant inflation, rising mortgage rates, and other deterrents—is proof that tenacious homebuyers who stick with it do eventually prevail. This is particularly true if they’re willing to widen their home search to more remote areas beyond where they’d imagined they could (or would want to) live pre-pandemic, places where it isn’t so hard to own a home and make ends meet.
“One factor driving the success of home shoppers is an incredibly strong labor market that is pushing up wages and giving workers the ability to negotiate remote or hybrid working arrangements, even as in-person work is growing more common,” says Hale. “With flexible work arrangements still available, home shoppers are able to consider homes farther afield of the office, in the more affordable suburbs or even in a new, less expensive state altogether, enacting their own personal plan to combat cost-of-living increases.”
It’s a true testament to the lengths that homebuyers are willing to go today—that is, as long as sellers are willing to meet them halfway.
How home sellers are undermining today’s ‘buyer-friendly’ market
Of course, what’s good for homebuyers is bad for home sellers—many of whom are panicked they’ve missed the peak of the market and are calling off their plans to sell at all.
For the week ending July 30, the number of new listings on the market dropped by 8% year over year.
“New listings fell from a year ago for a fourth week,” says Hale. “This is looking more and more like sellers may be wary of current market conditions, which have shifted substantially, even though they remain quite favorable to sellers who have owned for just about any length of time.”
And while overall inventory (of new and old listings) grew by 28% over this same week last year, “the active listings count still trails its 2020 and 2019 levels by more than 15% and 45%, respectively,” says Hale. “More improvement in active inventory is likely needed to bring balance, but the recent trend may be at risk if homeowner attitudes toward selling now continue to deteriorate.”
And if home sellers continue to drop out of the market in droves, homebuyers will have fewer properties to purchase and might get dragged back into the rabid seller’s market they’ve just escaped.
Why homebuyers aren’t rushing to close the deal
In July, listings lingered on the market a mere 34 days before getting snapped up—nearly half the time it took two years earlier. Yet now that we’ve entered the lazy days of August, homebuyers are at long last pumping the breaks and not feeling in such a rush.
For the week ending Aug. 6, properties spent three extra days on the market compared with this time last year, showing a second consecutive week of a slowdown.
“We expect more slowing ahead as the housing market resets,” Hale predicts.
Mortgage rates rose
According to Freddie Mac, for the week ending Aug. 11, the average 30-year fixed mortgage rate increased to 5.22%, a steep spike from the previous week’s 4.99%.
As for what the future brings, that will hinge in part on whether swirling rumors of a looming recession prompt companies to roll out layoffs.
“The big question for consumers is whether companies will over-react to the recession concerns and start trimming payrolls,” explains Realtor.com Senior Economist George Ratiu in a recent analysis. “A sharp pullback in hiring could have a direct impact on people’s ability to keep spending, especially with today’s high inflation.”
In other words, homebuyers may want to take full advantage of this buyer-friendly market while it lasts.
Watch: Will Buying a Home Get Even More Expensive? Another Interest Rate Hike Has Buyers Scrambling