Real Estate Market Shift: Buyers Gain Negotiating Power as Majority of US Homes Sell Below Asking Price

What's Happening?

The U.S. housing market is experiencing a significant shift, with more than half of homes sold in May going for less than their asking price. According to real estate analytics firm Cotality, 56% of deals closed below the list price, marking a notable change in market dynamics. This trend is attributed to a cooling housing market, where buyers now have increased negotiating power. The typical sale price was $45,000 under the list price, and the market has seen a 15% drop in sales compared to the previous year. The median list price remains at $495,000, while mortgage rates hover near 7%. Inventory levels are rising, with homes lingering on the market for an average of 58 days, a week longer than last year. Cities like Toledo, Ohio, and Savannah, Georgia, have seen significant increases in for-sale homes, with jumps of 128% and 108%, respectively.

Why It's Important?

This shift towards a buyers' market is significant as it provides potential homeowners with more leverage in negotiations, including price reductions, closing cost assistance, and mortgage rate buydowns. However, despite these opportunities, affordability remains a challenge, as buyers need approximately $200,000 more than a decade ago to purchase a median-priced home. The cooling market reflects broader economic conditions, including high interest rates and rising insurance costs, which continue to be barriers to homeownership. The increase in inventory and slower sales suggest a potential stabilization in the market, offering buyers more options and less pressure to make quick decisions.

What's Next?

As the market continues to cool, sellers may need to adjust their expectations and become more flexible in negotiations. The trend of homes selling below asking price could persist if economic conditions remain unchanged. Real estate professionals and economists will likely monitor these developments closely, as they could influence future market strategies and pricing models. Additionally, potential buyers may continue to benefit from the increased negotiating power, provided they can overcome the financial hurdles associated with purchasing a home.

Beyond the Headlines

The current market dynamics may lead to long-term changes in how homes are priced and sold. Sellers holding onto pandemic-era pricing expectations may need to reconsider their strategies, especially as delistings have surged. This could result in a more balanced market where both buyers and sellers have realistic expectations. Furthermore, the shift may impact the construction and development sectors, as builders and developers adjust to changing demand and pricing pressures.