More Homes Are Hitting the Market. Fewer Buyers Are Stepping Up

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The late-summer housing market is giving buyers something they have spent much of the past several years waiting for: leverage.

Whether enough buyers can afford to use it is another question.

New listings rose 0.4% from the previous week during the four weeks ending Aug. 23, reaching their highest level since April, according to new Redfin data. Active listings increased 0.5% week over week and were at their highest level since May.

At the same time, fewer homes are going under contract.

Seasonally adjusted pending sales fell 1.1% from the previous week and 3.1% from a year earlier, dropping to their lowest level since February.

That divergence is creating an unusual market as summer winds down. Buyers who remain active have more homes to consider and, in many markets, more negotiating room. Sellers, meanwhile, are competing for a pool of buyers that is not growing with inventory.

The problem for the industry is that greater negotiating power has not solved the affordability problem keeping many prospective buyers on the sidelines.

The median U.S. home sold for $400,649 during the four-week period, 1.9% higher than a year earlier, according to Redfin. The median monthly mortgage payment was approximately $2,600 based on the 6.65% average mortgage rate used in the company’s analysis.

Inventory has improved. Affordability has not improved nearly enough.

Buyers have leverage, but sellers aren’t collapsing

It would be easy to look at declining pending sales and rising inventory and conclude that home prices are about to break substantially lower.

The current numbers do not support that conclusion.

The median sale price remains higher than it was a year ago. Roughly 26.3% of homes sold above their asking price during the four weeks ending Aug. 23, and the average home sold for 98.8% of its final list price.

Median time on market was 44 days, unchanged from a year earlier.

That leaves buyers and sellers operating in a market that is neither behaving like the bidding-war environment of the pandemic era nor experiencing the broad price correction some affordability-constrained buyers have been waiting for.

Instead, negotiating power is increasingly showing up at the individual-property level.

A home that is priced correctly and attracts several interested buyers can still perform well. A property that has lingered on the market for weeks gives a buyer a very different opportunity.

Redfin head of economics research Chen Zhao said buyers should pay particular attention to those longer-listed homes, where sellers may be more willing to negotiate below the asking price, make repairs or offer concessions such as a mortgage-rate buydown.

For real estate agents and loan officers, that is where today’s market becomes more useful than the national headline numbers suggest.

A seller-paid temporary or permanent rate buydown, closing-cost assistance or another concession can sometimes change the economics of a transaction more meaningfully for a buyer than a modest reduction in the home’s purchase price. The appropriate structure depends on the borrower’s loan program, lender requirements and individual circumstances.

The opportunity is not simply finding a cheaper house. It is negotiating a transaction around what the buyer actually needs to make the purchase work.

The national numbers hide enormous differences

There is no single housing market underneath these numbers.

Pending sales in Seattle were down 18.1% from a year earlier, the largest decline among the major metros included in Redfin’s rankings. Houston was down 15.3%, Denver 13.2%, San Diego 12.9% and Atlanta 10.6%.

Other markets moved in the opposite direction.

Pending sales increased 4.7% year over year in West Palm Beach, 4.3% in Milwaukee, 3.3% in San Francisco, 2.4% in St. Louis and 2.2% in Cincinnati.

Prices are equally fragmented.

Seattle’s median sale price was down 4.6% from a year ago. Austin was down 3.7%, Fort Worth 1.7%, and San Jose and Houston each declined.

West Palm Beach, meanwhile, recorded a 10.2% year-over-year increase in its median sale price. Newark was up 8.9%, Pittsburgh 7.9%, Cleveland 7.5% and Milwaukee 7.2%.

Those differences are becoming increasingly important for an industry accustomed to talking about “the housing market” as though buyers and sellers everywhere are experiencing the same thing.

They aren’t.

An agent in Seattle is dealing with a much different demand environment than an agent in Milwaukee. A loan officer in Houston is competing for business in a market where pending sales have fallen sharply, while professionals in several Midwest and Northeast markets are seeing considerably more resilience.

National averages remain useful for understanding direction. They are becoming less useful for describing what an individual buyer or seller is likely to encounter.

Sellers face a pricing decision

There is also a message in these numbers for homeowners preparing to list.

More sellers are entering the market at precisely the moment buyers are becoming more selective.

New listings totaled 376,235 on a seasonally adjusted basis during the four weeks ending Aug. 23, up 6% from a year earlier. Active listings reached more than 1.5 million, 1.6% above last year’s level.

Months of supply increased to 3.8.

That remains below the four-to-five-month range Redfin identifies as balanced, but the direction matters. A seller entering the market today is facing more competition for fewer pending transactions than earlier this year.

The share of listings with price reductions was 20.8%.

Zhao cautioned sellers against pricing a property according to what a neighbor received a year or two ago. In a market where buyers have alternatives, an ambitious initial asking price can leave a home sitting while competing properties attract the limited pool of qualified purchasers.

That becomes especially important as the market moves beyond Labor Day and into a season when transaction activity typically slows.

An opportunity wrapped inside an affordability problem

There is an apparent contradiction in today’s housing market.

Conditions have become more favorable for buyers at the same time many buyers remain unable or unwilling to participate.

That is how inventory can rise while pending sales decline. It is also how buyers can gain negotiating leverage without producing a national collapse in home prices.

For the professionals trying to put transactions together, this changes the conversation.

The last several years often required helping buyers compete. Today’s environment increasingly requires helping them negotiate — while finding a way to make the monthly payment work.

For serious buyers who have the financial capacity to purchase, that can create opportunities that were difficult to find when homes routinely attracted multiple offers almost immediately.

For the broader housing industry, however, the weakening in pending sales carries a less encouraging message.

The country can put more homes on the market.

It still needs buyers who can afford them.