Housing numbers indicate a strong buyer’s market. There is a trap

This is the strongest home buyers’ market in more than a decade.

That’s the title of a new report from Redfin, a real estate brokerage owned by Cos Rocket. The report highlights specific data on the supply of homes for sale and the number of buyers actively searching.

According to Redfin, there were approximately 36.8% more sellers than buyers in October, with the largest gap in records dating back to 2013. Redfin defines a buyers’ market as one with at least 10% more sellers than buyers. Economists at the brokerage believe the last time there was a stronger buyer’s market was in the years after the 2008 financial crisis, when home prices fell across the country.

“Of course, this is just a buyer’s market for those who can afford to buy: many Americans have been priced out of the housing market as affordability has eroded,” Redfin researchers noted.

And that is the crux of the problem. Is it really a buyer’s market, if so many buyers are still undervalued 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. This far outweighs other challenges, including industry costs.

“Real estate companies are on the front lines of the industry and see first-hand the impact of housing affordability and local economic conditions on their customers,” said Jessica Lautz, NAR deputy chief economist.

House prices continue to weaken but, at least nationally, they were still 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.

“Much like the K-shaped trend seen in overall consumer spending – driven largely by higher-income groups – potential low-income home buyers face challenges due to an uncertain job market, slow wage growth and deteriorating financial conditions. This leads to weaker demand for housing and downward pressure on prices,” said Selma Hepp, chief economist at Cotality.

Mortgage rates have fallen from recent highs but are still about double what they were in the early years of the pandemic, when the market quickly became seller-friendly.

Cost remains the biggest barrier to buying a home, with about 75 of the top 100 housing markets still considered overvalued, according to Cotality.

In Washington, D.C., which was hit hardest by the recent government shutdown, potential buyers — largely those who weren’t affected by the shutdown — are discovering that it’s easier to score good deals.

“They realize they have leverage and find they can ask for price concessions and repairs,” said Paul Legere, a buyer’s agent with Keller Williams’ Joel Nelson Group, adding that he “felt like it might only be a short while.”

The shutdown may be over, but consumer confidence doesn’t point to an uptick in home purchases. In its November confidence survey, the National Association of Home Builders reported a decline in builders’ sales expectations over the next six months.

“We continue to see weakness on the demand side as a slowing labor market and strained consumer finances contribute to a challenging sales environment,” said Robert Dietz, NAHB chief economist.