The Housing Market Will Present Opportunities for This Spring

The housing market in the USA has seen a standoff between homebuyers and sellers in places like Florida and Texas. Buyers struggled with affordability constraints, while sellers rejected offers below 2022’s record highs. Recent developments indicate builders and homeowners are becoming more motivated to sell. This shift is giving buyers increased negotiating power, especially this spring.

Incentives Fuel Builder Sales

Lennar Corp. and KB Home, two prominent developers, recently highlighted this shift during their earnings calls. Lennar’s incentives in the first quarter represented 13% of its revenue, the highest since 2009. Executives predict these incentives will remain high in the current quarter, driving down profit margins to their lowest levels in a decade. KB Home, in response to sluggish demand, has shifted from offering private “pocket incentives” to promoting deals directly on its website. These efforts, coupled with price reductions in slower markets, have resulted in a sales boost.

Pressure Mounts on Builders

Builders are facing greater pressure as the supply of newly completed homes reaches levels not seen since 2009. In addition, the resale market is undergoing a shift. Florida and Texas, traditionally reliant on interstate migration for population growth, now have more existing homes for sale than in 2019, before the disruptions of Covid. Other states, such as Tennessee and Colorado, are also seeing similar trends, indicating a broader shift in the market. With poor affordability and a loose rental market, sellers are now finding themselves needing to accommodate buyers to close deals.

Signs of Seller Accommodation

Recent data from HousingWire indicates that sellers are beginning to break the deadlock. The number of new sellers increased by 9% year-over-year in the most recent week, with growth accelerating in March. Meanwhile, price reductions on resale homes have reached their highest level for March in a decade. This shift is signaling that sellers are becoming more flexible in response to changing market conditions.

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Transaction Growth Amid Market Shift

This change in the market is driving an increase in transactions. HousingWire’s data reveals that pending home sales have shown a year-over-year increase after trailing behind last year’s pace in January and February. Additionally, mortgage purchase applications have risen for four consecutive weeks, nearing the highest levels seen in the past year.

Regional Market Dynamics

The market shift is not uniform across the country. In the Northeast and Midwest, metro areas still favor sellers due to a shortage of homes and limited out-migration. The number of available homes has risen slightly, but it remains below 2019 levels. A John Burns Research and Consulting survey found that 75% of real estate agents in these regions reported that buyers outnumber sellers.

Southern Metros Show Signs of Recovery

In contrast, southern metros are experiencing a more dynamic housing season than in recent years. Although these markets are not yet affordable, a combination of higher incomes, relatively lower mortgage rates, and potentially lower prices compared to last year is making them more accessible for buyers.