Residential Real Estate News
Home Buyers Negotiation Power Grows Amid Cooling U.S. Market
Competition for buying homes easing fastest in Louisiana, Florida and Texas
According to Zillow's latest market report, U.S. homebuyers are finding more leverage in negotiations nationwide as competition eased in October 2024. The company's market heat index shows that conditions are gradually shifting toward a buyer's market as activity slows heading into winter.
"We're seeing buyer competition wane as mortgage rates climb back toward 7%, coinciding with the typical winter cooldown," said Skylar Olsen, Zillow's chief economist. "Inventory is slowly recovering, and price cuts remain relatively common, offering persistent buyers opportunities to secure deals or negotiate valuable concessions."
While rising mortgage rates and seasonal patterns affect the market nationwide, inventory trends vary by region. For instance, Southern states experience fewer winter weather disruptions, allowing housing activity to remain steadier. Additionally, inventory recovery from pandemic-era lows is further tipping the scales in favor of buyers, particularly in areas like Texas, Florida, and the New Orleans metro.
Buyers Gaining Ground in Key Markets
In October, Pittsburgh and Louisville joined 11 other major metros where buyers now have an edge in negotiations, following cities like Indianapolis, Nashville, and Atlanta, which transitioned to buyer's markets in September. Inventory levels have played a critical role in this shift. The 13 major markets currently favoring buyers rank among the top 20 nationwide in inventory recovery compared to pre-pandemic levels.
Reduced competition is also contributing to slower home value appreciation. The steepest monthly declines in home values have been recorded in Austin, Dallas, Atlanta, Tampa, and San Antonio. Southern markets, in particular, are seeing listings stay on the market longer compared to pre-pandemic trends.
Nationwide inventory is still recovering from the sharp deficit triggered by the pandemic, though significant progress has been made. As of now, inventory levels are about 28% below pre-pandemic norms for this time of year--the smallest gap since September 2020 and an improvement from the 36% deficit recorded in March.
New construction is playing a key role in balancing the market. In areas where builders have managed to meet demand more effectively, home prices and rent growth have largely stabilized.
Mortgage Rate Volatility Remains a Challenge
A brief dip in mortgage rates in September offered temporary relief to buyers, but rates edged higher again in October, eroding some affordability gains. Monthly mortgage payments on a typical home increased by 2.8% in October after four months of declines.
Despite this recent uptick, payments remain over $100 lower than their May peak and $179 less than October 2023 levels for buyers making a 20% down payment. However, mortgage rates are expected to remain volatile in the coming months, posing ongoing challenges for buyers navigating the market.
