According to an analysis by Zillow, buyers are increasingly gaining negotiating power as the housing market slows, especially in some of the nation's hottest markets. Previously, limited inventory and rapid price appreciation had kept sellers firmly in control of the market for several years as the United States recovered from the housing market collapse.
Data gathered from the Zillow Buyer-Seller Index noted that In 20 of the 35 largest metros, market conditions favor buyers more than they did a year ago. The index is based on the share of listings with a price cut, how long it takes to sell a home and the sale-to-list price ratio. The analysis is based on the comparison of each metro across time to show whether the market is cooler (favoring buyers) or hotter (favoring sellers) than it was in the past.
The analysis pointed out that California markets have seen the biggest shift toward buyers since last January, led by San Jose—which has seen the most significant swing. San Francisco, San Diego, Los Angeles, and Denver round out the top five markets where buyers will have an easier time navigating the market than they would have in recent years, Zillow found.
"It is no surprise that the markets which pushed the bounds of affordability over the housing recovery are now experiencing significant cooling," said Skylar Olsen, Zillow Director of Economic Research. "As down payments and mortgage payments far outpaced incomes, buyer demand eventually exhausted itself. Those buyers looking in cooling markets will likely welcome the relief, although the entry price is still high. Inventory is returning and spending more time on the market, meaning their decision making can be made with a cooler head."
Despite San Jose and San Francisco have having cooled exceptionally, they remain the hottest market compared with others around the country—markets where listings see few price cuts, homes don't stay on the market for long, and sale-to-list price ratios are higher. These Bay Area markets have the most prohibitive home prices wherein the typical buyer is compelled to invest above 20 percent down to keep mortgage payments at 30 percent of monthly household income. While buyers in San Jose require 49 percent down payment—which is nearly three times as much as the national median home value—buyers in San Francisco and Los Angeles would need 43 percent followed by San Diego at 31 percent. The buyers in all these areas would also need to put down more than 20 percent.
The biggest overall shift toward favoring sellers over the past year was experienced in Miami with homes selling about a week faster than they did a year ago.