It’s a Buyer’s Market, Except Buyers Still Can’t Afford to Buy

Redfin counted 966,752 active homebuyers nationwide in July, the lowest number in its records. Buyers dropped 2.5 percent from June. Sellers barely moved, falling just 0.3 percent. With 1,462,921 homes for sale, the market ended the month with nearly half a million more sellers than buyers. On paper, that's good news for buyers.

Sellers outnumbered buyers by 51.3 percent, up from 47.9 percent in June. Redfin considers a metro a buyer's market when sellers outnumber buyers by more than 10 percent. In July, 39 of the 49 major metropolitan areas it analyzed cleared that mark. That's not a soft market. Both sides are frozen. Sellers can't get their price; buyers can't afford to close. The 51.3 percent seller surplus is just shy of the all-time record set in December. If it clears that in August or September, the market sets a new record during what is supposed to be the fall rebound.

Redfin senior economist Asad Khan: "Buyers are dropping out faster than sellers."

The ones who are still in the market have options. The ones who got priced out don't.

Miami had the widest gap, with 154 percent more sellers than buyers. Nashville followed at 150.8 percent, then Houston at 129.8 percent, San Antonio at 116.3 percent, and Austin at 111.9 percent. Washington, D.C., had 30.3 percent more sellers.

Nashville Redfin agent Kristin Sanchez said buyers there can take their time and often get a better deal because sellers are willing to negotiate. The gap in Nashville reached 151 percent in July after coming in at 135 percent in June.

The average 30-year fixed mortgage rate was 6.67 percent on August 13. It was 6.69 percent a week earlier and 6.58 percent one year ago.

A newly built house sold for an average of $502,700 during the second quarter. That is down from the $541,300 record reached late last year. It is still a half-million-dollar house with a mortgage rate pushing seven percent. Khan on what that means if you still need to buy:

"Buyers have leverage, while motivated sellers may be willing to negotiate before the early-fall rush brings some buyers back to the market."

Miami and Nashville got flooded with construction and investor money during the pandemic boom. That inventory is now landing in a market that doesn't want it. Miami buyers also face rising insurance costs and homeowners association fees on top of the purchase price.

Houston, San Antonio, and Austin kept adding new homes as demand cooled. Fort Worth had 67 percent more sellers than buyers in June and 86 percent more in July.

Only six markets still favored sellers: Nassau County, New York; Newark, New Jersey; Providence, Rhode Island; Milwaukee; New Brunswick, New Jersey; and Montgomery County, Pennsylvania. Nassau County was the tightest of the group, with 36.2 percent fewer sellers than buyers.

Prices in those six sellers' markets rose an average of 4.2 percent from a year earlier. The increase across the 39 buyers' markets was 2.3 percent.

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At 6.67 percent on a $502,700 home, principal and interest alone comes to more than $3,200 a month. Taxes, insurance, and HOA fees come after that. Khan also pointed to uncertainty over Federal Reserve rate hikes as one more reason would-be buyers are staying put.

A frozen housing market doesn't stay siloed in the housing market. Workers can't relocate for jobs they can't afford to move for. Consumer spending on furniture, appliances, and contractors drops when people stop moving. Builders in Houston, Austin, and Fort Worth are still adding inventory into a market where demand is hitting record lows. That's a supply glut building in real time.

There are deals to be made out there. Getting to the closing table is the part nobody's figured out yet.

Editor’s Note: Thanks to President Trump’s leadership and bold policies, America’s economy is back on track.

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