The U.S. housing market is facing a significant gap between those selling homes and those looking to purchase a property, with 500,000 more properties listed for sale compared to the number of buyers. As reported by Redfin, the numbers came in at 1.9 million active sellers nationwide compared to 1.5 million homebuyers in the market.
Home seller numbers are at their highest since March 2020, while buyer activity is at an all-time low, only comparable to April 2020 when the housing market paused due to the pandemic. Based on the current data, it’s clear that after a prolonged period of escalating home costs and intense buyer competition, the housing market is finally shifting.
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Market Shifts Placing Sellers at a Disadvantage as Buyers Gain Upper-Hand
The recent housing market stats forecast a market slowdown, with a decline in buyers being the main catalyst. The shift is a drastic change from recent years when limited housing availability and bidding wars drove already high prices through the roof.
Part of the problem lies in the fact that sellers are standing firm with prices that don’t reflect reality; as Redfin Senior Economist Asad Khan mentions, “The balance of power in the U.S. housing market has shifted toward buyers, but a lot of sellers have yet to see or accept the writing on the wall. Many are still holding out hope that their home is the exception and will fetch top dollar.”
Through it all, home prices continue to escalate even as buyer interest dwindles. According to the National Association of Realtors, the median price of existing home sales rose 1.8% year-over-year in April to a value of $414,000. Add on top of this mortgage rates that are continually hovering near the 7% range, and you’ve got a situation where the average American buyer is locked out of the market.
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Economic Factors Influencing Buyer Hesitation
The gap between U.S. home sellers and buyers has also been impacted by economic factors such as inflation, tariff policies, the declining dollar, as well as the risk of war. Unaffordable prices at grocery stores, the cost of gas rising, electric bills becoming overwhelmingly expensive, and the like, have been enough for potential buyers to be mindful that their paychecks are not going as far as they used to.
In addition to this, Wall Street has many on edge, “Markets are simply volatile, but not necessarily declining, that pure uncertainty also has a dampening effect on the housing market,” states Chen Zhao, Redfin’s head of economic research.
Savings are shrinking due to a weak U.S. dollar, and the national debt nearing 37 trillion isn’t a reassuring thought. All that said, buyers are just not comfortable handing over a large down payment and taking on an elevated monthly mortgage, and this is certainly widening the gap between homes for sale and properties purchased.
Related Article: Consumer Sentiment Tanks Over Inflation Fears According to Survey
Experts Forecast Minor Decrease in Home Prices by End of Year
As predicted by Redfin analysts, home prices are expected to drop by 1% by the end of 2025, which won’t really move the needle on the buyer-seller gap. Zhao comments on why 1% is the expected target, “The reason we think home prices will fall by 1% and not something larger is because it’s actually very hard for home prices to fall, unless sellers have to sell. Sellers can always decide they don’t like the prices that are currently in the market and decide to stay in their home.”
So, it’s basically a wait-and-see game: Will housing prices drop? Will mortgage rates lower, spurring home purchases? Or will we remain on the same trajectory and see the gap between sellers and home buyers widen?
Market Conditions Funnel Would-Be Buyers into Rentals
With home purchases out of reach, the demand for rental properties is surging. This places property investors at an advantage, enabling them to easily secure good tenants while also not having to be too concerned about vacancies. In addition to this, when demand is high, rental rates typically rise, creating more cash flow and a higher return on investment.
If you’d like to jump into the rental real estate market while homebuyer interest is at an all-time low, feel free to contact the team at Morris Invest. We specialize in built-to-rent properties that are situated in lucrative housing markets, and offer mortgage rates that are typically lower than industry-standard. In addition to this, we keep our properties affordable by purchasing in bulk during the construction phase, which enables us to provide them at or below market value.
Head over to our Morris Invest & SDIRA Program Overview page for more details on how we can set you on the path to building wealth through real estate.
Before you go, dive into the following video that touches on why investing in rental real estate is a wise decision when the economy is unstable:
