If you’ve been watching the housing market over the last couple of years, you’ve likely noticed that sellers have had the upper hand. But with inventory beginning to rise, could that be about to change? Here’s what you need to know.
Defining a Balanced Market
A balanced market is generally described as one with about a five- to seven-month supply of homes for sale. In this situation, neither buyers nor sellers have a significant advantage. Home prices tend to level off, and there are more options for potential buyers. After several years where sellers were in control, a balanced market might be just what prospective buyers are hoping for. But is that where we’re headed?
Nationally, we started the year with a three-month supply of homes, which has now grown to four months. While that may not seem like a large increase, it suggests the market is slowly moving toward balance—though it hasn’t arrived there yet. It’s crucial to understand that this rise in inventory is not leading to an oversupply that could cause a market crash. Even with the recent uptick, we are still far from having enough inventory for that scenario.
The graph below, based on data from the National Association of Realtors (NAR), provides an overview of inventory levels in the past compared to today:
Currently, we are still in a seller’s market, but it’s not as intense as it has been over the past few years. As Mark Fleming, Chief Economist at First American, states:
“The faster housing supply increases, the more affordability improves and the strength of a seller’s market wanes.”
What This Means for You and Your Move
Here’s how this market shift affects you and the conditions you’ll encounter when you decide to move. Lawrence Yun, Chief Economist at NAR, explains:
“Homes are sitting on the market a bit longer, and sellers are receiving fewer offers. More buyers are insisting on home inspections and appraisals, and inventory is definitively rising on a national basis.”
The graphs below use the latest data from NAR and Realtor.com to illustrate these trends.
Homes Are on the Market Longer: With an increase in the number of homes for sale, properties are taking longer to sell. For buyers, this provides more time to find the right home. For sellers, it’s essential to price your home accurately to sell quickly. If the price isn’t right, buyers may choose better-priced alternatives.
Sellers Are Getting Fewer Offers: Sellers may need to be more open to negotiations on price or terms to close deals. For buyers, the market shift could mean less competition and more choices.
Fewer Buyers Are Forgoing Inspections: Buyers have more leverage in negotiations now, which is why fewer are forgoing inspections. Sellers should be ready to negotiate and address any repair requests to keep deals moving forward.
How a Real Estate Agent Can Help
These are national trends, but market conditions can vary greatly based on local inventory. Rely on a local real estate agent to understand how your area compares.
Whether you’re buying or selling, knowing how the market is changing can give you a distinct advantage. Your agent can provide the latest market data and local insights to guide you effectively.
Bottom Line
The real estate market is constantly changing, and being well-informed is vital. Understanding the shift to a more balanced market, whether you’re buying or selling, can be very helpful. If you need any advice or have questions, don’t hesitate to contact us.