After over 2 years of a burning hot Seller's market, are we in a buyer's market?

Starting in April 2020 a perfect storm made for a seller's market.  It isn’t news that the real estate market only continued to heat up and values took off in 2021. Buyers had the difficult lesson of accepting a very imbalanced market.  Buyers competed against multiple offers, bid on homes often well over list price, waived their contingencies, and paid over appraisal. In many cases, buyer's offered everything they could on their dream homes and it still wasn't enough.  Now it’s time for buyer’s to finally have their turn.

“By the end of September, we were at 248% of the number of homes for sale in only 7 months.  That number of homes for sale on the market is at 2019 numbers.”  

Things have changed dramatically in the real estate market in many parts of the country.  In Las Vegas, sales started slowing down in March 2022 and felt like a complete stop in May 2022.  Since April and May, sales were down 29% on average, causing inventory to rise fast.  That’s about 1 in 3 homes no longer selling in 30 days or less. That in turn caused inventory to increase rapidly.  From March to May we saw the number of homes on the market increase by 43%.  By the end of September, we were at 248% of the number of homes for sale in only 7 months.  That number of homes for sale on the market is at 2019 numbers.  The result of higher interest rates, high prices, and fear of recession have created a new perfect storm.  This time in favor of the buyer.

During the hot seller's market, high buyer demand and low inventory, allowed sellers to ask for and get almost anything they wanted. I remember in the Summer of 2021 sitting down at the kitchen table in a client's home, discussing their property value and my recommendations for pricing strategy.  As I do in all my listing meetings, I went over a comparative market analysis (a valuation report) showing why I valued their 2000 sf home built in 2016 between $400,000-405,000.  I recommended they list between $410,000-$419,000 given the upward trajectory of the market.  My client asked me if they were listing too low because of the stories they heard and crazy real estate sales they've seen on Zillow.  For example, they asked, what if we listed for $450,000?  I told them, in this market, they could list for almost anything and they would get offers.  I meant it.  I explained that the supply and demand issues were forcing buyers with no options to pay exorbitant prices. I warned that we would have an issue with appraisal and we would severely limit our buyer base. In the end, those clients took my advice and listed for $410k.  That created a multiple offer situation and we had an easy sale for $417k.

“[...] all the factors for a seller's market have been removed.”  

Right now and over the last few months, there's a very different reality where all the factors for a seller's market have been removed. There's a lot more inventory on the market as homes take longer to sell and new homes are being added daily.  There are a lot less buyers in the market because of dramatically higher interest rates and fear of a downward trending market.  Most listings are no longer getting more than one offer at a time, and it’s taking weeks or even months. No multiple offers and properties sitting on the market means the bidding wars are gone and negotiations are taking place in favor of the buyer.  Many listings aren't even getting showings for weeks at a time.  Every 7 days, 1600-1850 homes are dropping their price. I’ve been tracking that decline since July.  That’s four months of more than 1600 homes dropping their price, weekly.  That’s more than 25,000 price drops!

With an increase in inventory, buyers have a lot more choices. Now they get to be picky.  With Sellers getting nervous and motivated to sell, we are seeing a massive comeback of buyer incentives to purchase.  Sellers are offering closing cost contributions, lenders are offering credit towards buying down interest rates, and builders are offering promotional interest rates along with credits towards upgrades.   When a buyer can get credits from the sellers, lenders, and builders, they now can purchase a home with much less cash than they needed over the last few years.  This is necessary to help offset the high interest rates keeping many buyers from being able to afford a home.  

“Depending on a person's goals and the urgency of their needs, my advice will be different.  It’s a good time to buy right now, but if you are in a position to wait to purchase a home you’ll benefit from prices continuing to drop.”  

The question “Are we in a buyer's market?” needs to be distinguished from the question of “Is this a good time to buy?”.  Judging by the amount of power buyers have in negotiations, more choices in homes, and all the incentives available to buyers, we absolutely are in a buyer’s market, a very strong one at that.  To answer the second question depends largely on a person’s individual position. ^[a] I make it a point to ask a lot of questions when people are looking for advice on buying a home.  The most important questions I ask start with “Why:”

• Why are you moving?
• Why do you want to buy?
• Why now? 

Depending on a person's goals and the urgency of their needs, my advice will be different.  It’s a good time to buy right now, but if you are in a position to wait to purchase a home you’ll benefit from prices continuing to drop.  Interest rates, however, are likely to continue to rise.  Are you a cash buyer?  Then that doesn’t matter.   Are you in a lease that’s just ending and your rent is about to go up?  Then maybe purchasing today is still a better move so your budget for rent can start going towards building equity in your own home.   There are deals to be made today in the buyer’s favor.  In many cases, you can negotiate a price that protects you for future declines.  If you do not have enough money for all the costs of purchasing a home, you especially can take advantage of this buyer’s market and potentially own a home now with all the closing costs credits and incentives available.  This is especially true when it comes to purchasing new homes.  

Yes, we are in a buyer’s market.  

Is it the right time to buy?  That depends, and I’m here to help you figure it out.  

It’s never too early to reach out for real estate advice and start planning.