Is the Housing Market Finally Settling Down?

Stories of frequent and intense bidding wars have dominated real estate headlines for months. With the number of buyers looking to purchase a home dramatically outweighing available inventory, competition became the norm, driving up the prices of the few homes that entered the market. 

Buyers that braved the housing market over the past two years may have experienced the challenging conditions firsthand, getting outbid on several homes along the way. But good news has arrived- house hunters are in a better position to buy as the market shows signs of finally settling down. 

Data shows clear signs of bidding wars easing up 

According to the National Association of Realtors (NAR), the average number of offers on recently sold homes has steadily declined:

 

Graph provided by Keeping Current Matters, Source: NAR. 

 

The graph above illustrates an average of five offers per home in early 2022. The most decent data shows that the average has declined to 2.8 offers per recently sold home. The shift is largely due to rising mortgage rates that have moderated buyer demand and slowed home sales, resulting in a growing inventory of available homes on the market. 

A stabilizing housing market 

Growing inventory and rising interest rates signify a slowing of the real estate market. These changes affect buyers, sellers, and homeowners alike as they think through their next move. It’s important to understand that current conditions shouldn’t raise any alarm bells, but simply a return to normal market conditions as the last three years have been abnormal. Homes spending 60 to 90 days on the market coincides with averages seen five years ago. 

Higher home inventory

While the number of available homes hit a record low in December 2021, supply has been steadily growing since. As of June 2022, there were 19% more available homes on the market compared to the same time the year prior. In some metropolitan areas, the increase in inventory has been even larger. 

A higher number of homes on the market is good news for buyers, who can enjoy more options and less competition than they did a year ago. 

Price reductions are becoming more common

Home price reductions have been almost unheard of during the recent market peak. Instead, buyers were purchasing homes for way over their asking price, often while waiving an inspection. Now, as inventory numbers begin to rise and the market becomes less competitive, trends have started to shift.

 

In May 2022, 10.5% of sellers reduced the price of their home- a figure that rose from 6.2% the year prior. 

As further proof of changing conditions, Realtor.com reported 92% of home sellers who sold within the last year had accepted some buyer-friendly terms. 

A note for current sellers

Sellers are advised to work with professional real estate agents who are familiar and well-connected in the local housing market. Buyers have choices right now, so it’s important for sellers to market their property correctly. Open houses, great photos, and accurate descriptions matter again, so sellers need to join the market prepared.  

Final thoughts

If you put your plans on pause because of the competitive conditions in recent years, it may be time to revisit your home search. Bidding wars, waived inspections, and other anomalies are easing, signaling less competition for buyers. If you’re ready to get serious about making a move towards a new home, let’s connect to get started today.