California has become a buyer’s housing market, where there are many more home sellers than home shoppers.
As available homes increase and remain on the market longer, fewer consumers are looking to purchase, concerned about a slowing economy and weakening job market, according to a new Redfin report.
Affordability also remains a huge hurdle, with near-record-high price and still 6%-plus mortgage rates despite some movement lower in recent weeks. Fewer than one of every five households in California could afford to buy the median-priced home during the second quarter, according to the California Association of Realtors.
Concerns about being able to buy coupled with the ability to pay down the road have caused many would-be buyers to hold off on what is likely their largest-ever purchase – but also possibly their greatest wealth generator.
“Homebuyers are spooked by high home prices, high mortgage rates and economic uncertainty, and now sellers are spooked because buyers are spooked,” said Redfin senior economist Asad Khan. “Some sellers are delisting their homes or choosing not to list at all after seeing other houses sit on the market for weeks or months, only to fetch less than the asking price.”
MORE SELLERS THAN BUYERS – AND MANY MORE SELLERS IN SOCAL
Nationwide, there are 36% more home sellers than shoppers, with Florida and Texas facing the widest margins, with twice as many homes on the market than potential buyers in several cities (we’re looking at you, Austin, San Antonio, Miami, Tampa and Jacksonville).
California is faring a bit better, likely because of a more diverse economy and a severe shortage of homes.
Statewide, home sellers exceed home shoppers by 32%, based on an aggregate of eight cities in the state, from the Bay Area and the Sacramento region to San Diego.
Southern California is the most buyer-friendly market – or where the most sellers are losing sleep. Riverside County has 68% more sellers than buyers, easily the widest margin in the state. But Los Angeles and Anaheim sellers also outnumber buyers by 49% and 30%, respectively.
Redfin defines a so-called “buyer’s market” where there are 10% more sellers than shoppers. A seller’s market is flipped the other way, where there are 10% more buyers than sellers. And a balanced market is considered whether there is less than a 10% swing either way.
About 32% more sellers than buyers in California
| City | % more seller than buyers |
|---|---|
| Anaheim | 29.6% |
| Los Angeles | 49.2% |
| Oakland | 23.2% |
| Riverside | 67.5% |
| Sacramento | 37.5% |
| San Diego | 20.3% |
| San Francisco | 17.3% |
| San Jose | 11.2% |
Source: Redfin
‘LIKELY THE MOST BUYER-FRIENDLY HOUSING MARKET’ SINCE 2008
Buyers benefit greatly when the market swings in their favor. There are more available homes, they can negotiate better on the price and even demand some concessions, like the seller helping pay points on the mortgage.
During the housing collapse that led to the Great Recession, buyers would ask for – and often get – concessions, like the seller leaving some furniture or pre-paying for the gardener for a year. But we are far from those days, say economists and housing experts.
“We’re likely in the most buyer-friendly housing market since the 2008 financial crisis,” Khan said. “Back then, inventory piled up as foreclosures surged, and demand was weak, meaning buyers had negotiating power. We’re not headed for another 2008, though; many of today’s homeowners have built substantial equity thanks to the recent surge in home values, and today’s borrowers must meet stricter lending standards. Plus, there are more options for avoiding foreclosure if a homeowner is at risk of defaulting, such as loan modification.”
Also, some housing markets are faring much better than others, at least for now. The Bay Area is a buyer’s market, but there only 11% more sellers than shoppers in San Jose and 17% more in San Francisco.
LOWER RATES COULD JUMP-START SALES
But even in the Bay Area, like the entire state, buyers are gaining the upper hand, pushing down prices and slowing sales.
“The market appears to be cooling off slightly as home prices dipped for the third straight month,” said Jordan Levine, chief economist for the California Association of Realtors.
It’s a big change from when buyers were competing for far-too-few homes just a few years ago, with sellers enjoying multiple offers well above the listing price.
For now, buyers hold the cards – and the offers. Although a big drop in mortgage rates could change things.
“I’m telling buyers to act now because it’s still a buyer’s market and most sellers are willing to negotiate,” said Ali Mafin a Redfin Premier agent in San Francisco. “If rates do plummet, the market will get competitive.”
