For those who have tried to buy a home during the pandemic-era, you might understand first hand a thing or two about the limited supply of homes for sale. This proposed a significant challenge for buyers, and created one of the best markets for sellers ever. Intense bidding wars, multiple offers, asking prices being a suggestion, and contingencies not existing, were all common place. Buyers competed in one of the hardest market places ever, and few were lucky enough to come out with the cards in the favor. A market shift could certainly change this and give the buyers the upper hand.
However, this challenge might finally be ending. As a market shift is certain, and actually already being seen, this might be one of the best opportunities to buy in years. Data suggests that buyer demand is finally moderating, as a combination of fewer buyers who have not bought already, higher prices, and higher borrowing costs push away demand. Here are a few reasons why the market shift would be a good thing for buyers.
Housing Market Challenge
The original problem in the housing market we have seen in recent years is supply. There are a lot of reasons as to why we have seen a lack of supply. Some of these include: a history of underbuilding since the housing crisis, as well as record high demand and record low rates. As we have seen in recent months, the demand for housing has lowered as prices increased alongside rates. However, an overlooked aspect of inventory problems is the underbuilding. As the graph posted down below shows, the supply of housing is considerably below what the market saw in the past 10 years.
Market Shift Opportunity
The opportunity that has arisen from this challenge is strong for buyers. Towards the end of the graph, you can see that we are actually seeing a decent uptick in housing builds. To see this upside tick on home building is largely due to the relaxation of the other problem. Mortgage rates have ticked up, which has slowed the demand for housing. Because of the slowing demand, home builders are able to sort of play catch up. As the increase in inventory begins to moderate, homebuilders will either slow their building, or start taking order only.
Having more options in the market also leads to less run up in home prices. Not only will home prices slowly begin to moderate, but there will be less bidding wars and over-ask sales. According to data from Realtors Confidence Index from NAR shows that this trend has already began. In recent reports, biddings wars are easing coming into the end of summer.
The shift we have started to see in the real estate market is subtle, but important. As this shift begins to gain momentum, we may finally see a neutral, or even buyer’s market, in the near future. Who knows what we will see coming into the near future, but the shift that we are seeing is likely to stay.