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The Big Shift: Which Markets Favor Buyers vs. Sellers?

Knock has announced the unveiling of the Knock Buyer-Seller Market Index, revealing the U.S. housing market began to shift in July toward buyers for the first time since 2017. The new index analyzes key housing market metrics to measure the degree to which of the nation's 100 largest markets favor home buyers or sellers.

According to the index, all 100 markets strongly favored sellers through the first five months of 2022 with the month of April being the best time to sell a home since the beginning of 2017, the start of the index's data series. June was the first time the market dipped below historic peaks for sellers, with July indicating a significant shift in market dynamics.

Key Findings:

  • Buyers have something to celebrate: Marking a shift from the first half of 2022, nearly all of the 100 largest housing markets moved toward favoring buyers in July.
  • Recent peak: The seller’s market peaked in April, the most favorable to sellers in recent years.
  • Big changes coming: Nationally, housing markets will favor buyers more in 2023.
  • Big changes are coming: Boise, IdahoPhoenix and Colorado Springs, Colo., are among the 15 housing markets that will favor buyers by mid-2023.
  • After a 71% run-up in home prices during the pandemic, Austin, Texas, is expected to become one of the most favorable buyers' markets.

"At Knock, our mission is to bring certainty, convenience and cost savings to buying and selling homes. Our Buyer-Seller Market Index is designed to help people make more educated decisions about the best time to buy and sell," said Knock Co-Founder and CEO Sean Black. "After two years of homes selling quickly and often well-above list prices, we are beginning to see a more balanced market. With the overall U.S. housing market projected to equally favor buyers and sellers by June 2023, home shoppers may see the most favorable conditions in recent history. At the same time, that doesn't mean a return to 2008. Sellers, who have already seen substantial equity gains in recent years, will still hold the advantage in many markets."

The shift begins

Fewer than 150,000 homes were sold across the nation's 100 largest housing markets in July, the lowest monthly sales figure in 12 months and down 50.7% since July 2021. The nation's housing inventory rose 6.8%, median days on market increased 27.3% and median sale price for all housing types was up 9.6%.

Eighty-one of the 100 largest metropolitan areas favored sellers in July. In a buyers' market, sellers are more likely to accept a lower price than the list price. The opposite is true in a sellers' market where homes often sell for more than the list price.

After a year of record-setting markets for sellers, the national housing market has started to move toward favoring buyers. Following April's peak, the market has started moving toward favoring buyers.

In the beginning of 2022, all markets favored sellers at historic levels. The seller's market index reached an all-time high for its month in each of the first five months of the year. In April, the market favored sellers more than in any month since the beginning of 2017 - the start of our data series. Meanwhile, in June and July 2022, the market dipped below monthly historic peaks toward buyer favorability for the first time since May 2021. Despite the decline, June and July still rank in the top 20 most favorable months for sellers nationwide since 2017.

This means that while median sale prices have continued to rise across the nation, overall price growth has started to slow. At the same time, the number of homes sold and the likelihood a buyer will pay more than the list price are going down. The time it takes to sell a property and the inventory of homes available on the market are increasing.

The median sale price across the 100 largest, most active housing markets also increased each month for the first six months of 2022, climbing from $360,000 in January to $410,000 in June. This reflects the general seasonal pattern of home prices rising from the start of the year through the summer.

Selling still more ideal than buying in most large U.S. housing markets

In 81 of the 100 largest metropolitan areas, housing market conditions continued to favor sellers in July. Three markets in California —San Diego, San Francisco, San Jose— moved significantly enough to be considered buyers' markets in July. Sixteen markets moved from favoring sellers into the neutral range, to favoring neither sellers nor buyers. Though most markets still favor sellers, nearly all 100 housing markets moved toward favoring buyers when compared to July 2021.

Home prices rose in every major housing market last month compared to July 2021. Reflecting the more recent overall shift in the market toward buyer favorability, some of it seasonal (slower summer markets), median home prices dropped in 73 of the 100 largest metros since June.

With consistent and increasing advantages for sellers in recent years, the median days a home stays on the market has hovered at historic lows. Across the 100 largest markets, a typical home on the market was sold within 10 days of the listing during most months this year. In June and July, with the market starting to move toward buyers, median days on market rose to 12 and 14 days, respectively. For reference, a home was likely to stay on the market for three weeks to a month during the peak buyer's market of 2017. More days on the market can mean less competition and more options for buyers.

Fewer than 150,000 homes were sold across the nation's 100 most active housing markets in July, the lowest monthly sales figure of the past 12 months and down 50.7% since July 2021. The nation's housing inventory rose by 6.8%, median days on market soared by 27.3%, and median sale price for all housing types increased by 9.6%.

Looking at the month-to-month change, housing inventory and median days on the market rose in July compared to June, though median sales price dropped 2.4% to $400,000 in July. The national median sale price peaked in May and June at $410,000, the highest figure of any month in the last six years.

The national market will favor buyers more by July 2023, but sellers will continue to have the advantage in most markets

With the national market projected to equally favor sellers and buyers by June of next year, prospective property investors and home buyers may see the most favorable national market in recent years.

For sellers, the most favorable month next year is likely to be March, before dipping into neutral territory. The index value for March is projected to be roughly in line with the national housing market in July, while the rest of the year, the values will be lower, moving toward favoring buyers.

In a buyer's market, the sale price-to-list price ratio is more likely to be below 1, meaning sellers accept a lower price than they listed their houses for. The opposite is true in a seller's market, where homes often sell for more than the list price. The Austin metro area is projected to have the lowest sale-to-list ratio in July 2023, while Buffalo, N.Y., will have the highest.

While the national housing market is expected to become consistently less favorable to sellers through July 2023, it is still likely to remain more favorable to sellers than buyers for most of this period, through May 2023.

As more markets slowly shift toward favoring buyers, median sales prices are expected to continue to decline, but only slightly. After bottoming in January 2023, the median sales price nationwide is projected to continue to rise, reaching $425,000 in July next year.

While next year's projected home sale price would again set a new record for the nation, the YoY increase of 6.3% would be low compared to recent years. Home prices rose 8.4% over the 12 months through July 2020, and by 17.7% through July 2021, when the pandemic led to a surge in property demand.

To read the full report, including more charts and methodology, click here.

About Author: Demetria Lester

Demetria C. Lester is a reporter for DS News and MReport magazines with more than eight years of writing experience. She has served as content coordinator and copy editor for the Los Angeles Daily News and the Orange County Register, in addition to 11 other Southern California publications. A former editor-in-chief at Northlake College and staff writer at her alma mater, the University of Texas at Arlington, she has covered events such as the Byron Nelson and Pac-12 Conferences, progressing into her freelance work with the Dallas Wings and D Magazine. Currently located in Dallas, Texas, Lester is an avid jazz lover and likes to read. She can be reached at [email protected].

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