Sean Craig
7 min read
The past few years have been a whirlwind for homebuyers, from a pandemic-driven housing boom to inflation-induced interest rate hikes that made borrowing increasingly expensive. As it stands today, many people looking for an abode are getting clobbered by a one-two punch: arm-and-a-leg home prices and stubbornly elevated mortgage rates.
That means, for many Americans, going to open houses is basically worth it only for the complimentary canapés, a consolation snack while they restrain their homeownership ambitions until better market conditions arise (fingers crossed).
The spring season, typically the housing market’s busiest, hasn’t provided much cause for optimism: Existing home sales fell 0.5% in April from March, according to the National Association of Realtors. Home sales for each month fell to their weakest since 2009, when the Great Recession was in full swing following the subprime mortgage crisis. In February, JPMorgan analysts were muted about the US housing market’s prospects, writing it was “likely to remain largely frozen through 2025.”
But a notable new report last week from Redfin argued that some air may be let out of the bubble soon, much to the advantage of prospective buyers. The big reason, according to the brokerage’s analysis: Sellers now outnumber buyers by nearly half a million, the biggest gap on record since 2013.
So, could the most favorable ratio for buyers in over a decade give them enough leverage to close deals and even bring prices down? Let’s take a look (and, if not, there’ll always be the canapés).
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First, a quick catchup on the forces that brought us to this place.
During the pandemic, housing demand went through the roof. As Federal Reserve Bank of San Francisco researchers explained, that was thanks mainly to the massive shift to remote work, a “key factor explaining why U.S. house prices grew 24% between November 2019 and November 2021.”
San Francisco Bay-area tech workers could suddenly take their high incomes and buy homes in cheaper (for them; sorry, locals) Austin, Texas, or Denver, Colorado. Wall Street professionals could do the same in Miami or Tampa Bay, Florida.
By 2022, Federal Reserve Board economists estimated that “new construction would have had to increase by roughly 300% to absorb the pandemic-era surge in demand.” Instead, the mushrooming demand prompted the housing market to overheat. In November 2021, for example, there were 2.3 million prospective homebuyers versus 1.4 million sellers, giving the latter a significant market advantage.
