Homebuyers can expect to face less competition in the coming months as the housing market heads into slower winter months.
According to the National Association of Realtors® (NAR) Confidence Index Survey, Realtors® are forecasting a slowdown in both buyer and seller traffic in the next three months and a much slower fall and winter than last year.
The three month outlook for the buyer traffic index fell to 50 in September, down 57 from August and 66 a year ago. A higher index indicates that a higher share of respondents believe buyer traffic was stronger than last year. An index of 50 means that Realtors® are split between buyer traffic getting stronger or weaker.
Twenty-four percent of respondents expect buyer traffic to get weaker in the next three months, 24% expect it to get stronger, 46% expect stable traffic, and 6% don’t know.
Buyer traffic slowed in September after record home sales in spring and summer, and is down substantially from last year’s abnormally busy fall. The buyer traffic index fell to 57 in September, down from 61 in August and 75 a year ago.
For homebuyers, weaker traffic means fewer bidding wars that drive up sales prices. The share of listings that had more than one offer fell to 58.9% in September, down from 74.3% in April, according to national real estate broker Redfin.
Realtors® reported that 41% of their clients’ bids were above list price, down from 45% in August, and the average number of offers per sale fell from 3.8 to 3.7.
That’s especially important for first-time homebuyers who are often disadvantaged in bidding wars because they have no home equity and less cash to bring to the table. First-time buyers made up just 28% of sales in September, down from 29% in August and 31% a year ago. Meanwhile, all-cash sales increased to 23%, up from 18% last year.
While demand is expected to ease in the coming months, prices aren’t likely to come down. Realtors® expect prices to increase slightly over the next three months and over the next year.
This is largely because supply is still very short and home builders are finding it difficult to catch up due to material and labor shortages.
Likely due to pandemic concerns, sellers have been less than helpful in bringing more inventory online. The seller traffic index fell to 46, down from 47 in August and 44 a year ago. A score below 50 indicates weaker seller traffic than a year ago. The three month outlook for the seller traffic index is 45, suggesting that this trend is likely to continue through fall and winter.
While inventory may be limited, the coming months may provide homebuyers a brief period of soft competition while interest rates remain low.