housing market is shifting closer to favoring buyers
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By Brenda Richardson | Published on November 30, 2022
The housing market moved further in the direction of buyers last month as the markets that cooled the fastest in response to quickly rising interest rates and home prices continued to moderate, according to the Knock Buyer-Seller Market Index released today. At the same time, many strongholds show no sign of slowing down and some are expected to gain momentum over the next year.
The index, which analyzes key housing market metrics to measure the degree to which the nation’s 100 largest markets favor home buyers or sellers, showed that the housing market entered neutral territory last month – the first time since July 2020 that neither buyers or sellers had the upper hand. All but one market – Fayetteville, North Carolina – has moved at least marginally toward favoring buyers over the last 12 months, a trend that will continue over the next year. In October, 51 markets were sellers’ markets, 39 were neutral and 10 favored buyers.
The shift toward buyers’ markets is being driven by a number of key housing market metrics, most notably declining home sales. Just 127,000 homes were sold in the 100 largest housing markets in October, down 51.4% from 262,000 a year earlier and a record low of any month since November 2016, the beginning of Knock’s Buyer-Seller Market Index. The median home price was $388,000, compared to $360,000 a year ago, while average days on market increased to 19, up a full week from October 2021.
The average sale-to-list ratio, which measures how close homes are selling to their asking price, was 99% in October, unchanged from September and down from 101% a year ago.
“The housing market has borne the brunt of the Fed’s attempt to control inflation,” said Knock co-founder and CEO Sean Black. “At the same time, it has continued to demonstrate its resiliency. Despite moving into neutral territory, sellers still hold the advantage in a majority of the nation’s largest metros, and many will continue to favor sellers well into 2023. With interest rates stabilizing in recent weeks and less competition, buyers may begin to re-enter the market over the next few months, which could result in a return to a more normal spring home-buying market.”
Sellers’ markets poised to heat up further
The largest movements driving the housing market’s shift to buyer-favorability are occurring in neutral and more buyer-friendly markets. Strong sellers’ markets, by contrast, are cooling at a slower pace, remaining firmly in seller territory, or even heating up again in terms of some key housing metrics.
In October, six of the top 10 sellers’ markets were in the South, three were in the Northeast, and one was in the Pacific Northwest. Although home prices in these markets continue to rise more than the national median sale price, three of the markets – Seattle; Greensboro, North Carolina; and Portland, Maine – have seen prices fall 10% or more from their peaks earlier this year.
In each of the top sellers’ markets, the number of homes for sale is limited, which is either driving sale prices up or resulting in a quick list-to-sale time frame. Homes in Rochester, New York sold for 7% above asking – the highest of any largest housing market – in October.
Sellers in Hartford, Connecticut and Portland, Maine commanded premiums for their homes of 102% and 101%, respectively. Sellers in these markets sell their homes more quickly than in most other large markets; homes in 13 sellers’ markets spent less than 10 days on the market. In Portland, a home spent an average of seven days on the market, while in Greensboro, Winston-Salem and Fayetteville, North Carolina it was eight days.
According to the index, today’s top sellers’ markets will be immune from the national trend of rising inventory and slowing or falling home prices well into 2023. Inventory is forecast to decline in seven of the top 10 sellers’ markets with the number of homes for sale in Fayetteville (-26.1%); Hartford (-10.7%) and Columbia, South Carolina (-10.5%) shrinking by double-digits. The median sale price is forecast to rise by 10% or more in four of the top 10 sellers’ markets – Greensboro (13.3%); (Columbia, S.C. (13.2%); Savannah, Ga. (11.1%) and Little Rock, Arkansas (10.0%). Average sales will remain above or level with list prices in five of the top 10 sellers markets – Fayetteville, North Carolina; Winston-Salem, North Carolina; Hartford, Connecticut; Rochester, New York and Portland, Maine.
Here’s where buyers have the luxury of time, more choices
Month’s supply exceeded two months in all of the top 10 buyers’ markets, except for Nashville, where it stood at just 1.6 months. Las Vegas, the seventh best buyers’ market in October, had a supply of 4.2 months, the largest of the 100 housing markets considered in the index.
In October, it was normal for a home to stay on the market for three weeks or more in the top 10 buyers’ markets. In Phoenix, the nation’s top buyers’ market, a typical listing took 34 days to sell, while Columbus, Ohio, led the nation in days on the market at 44. Prices fell year-over-year in two of the 10 buyer-friendly markets: Boise City, Idaho (-3.7%) and San Francisco (-3.3%). Year-over-year sales growth did not keep pace with the national average of 7.8% in six of the 10 markets: Salt Lake City (7.7%); Las Vegas (5.3%); Phoenix (5.2%); Austin, Texas (3.5%); Ogden, Utah (3.5%) and Crestview, Florida (2.6%).
The average sale-to-ask price ratio declined to remain below 100% in all of October's buyers’ markets with the exception of San Francisco, where the average sale still exceeds the asking price by 1% – one of the highest sale-to-price ratios, but also down considerably from October 2021, when a typical home sold for 7% more than the list price in the San Francisco area.
Housing market expected to approach balance by October 2023
Despite gaining some momentum toward sellers in the spring, the largest 100 housing markets are forecast to move firmly into buyers’ market territory as early as summer 2023. By October 2023, 26 markets are forecast to be buyers’ markets (up from 10 in October 2022), 38 markets will remain sellers’ markets (down from 51), and 36 will be neutral.
Driving the shift are a 8.5% decline in home sales and a 16% increase in inventory over the next 12 months. Nationally, the median sales price is forecast to peak in June 2023 at $416,000 and fall to $410,000 in October 2023, a 5.6% increase over October 2022. This follows a typical home-selling season.
Median days on market are forecast to rise to 28 days, while average sale prices across the nation are forecast to remain lower than the average ask price in each of the next 12 months.
Housing inventory is expected to grow in all but a handful of markets, pushing months of supply up from 1.9 months in October 2022 to 3.4 months in October 2023. A balanced market is considered somewhere between four and six months of supply. The recovery in months of supply is the first time the market has approached equilibrium since April 2019, when supply peaked at 3.7 months.