The cooling real estate market should be good news for buyers. After several years of high competition and soaring home prices, the extreme seller’s market of 2020-2022 appears to be over.
But with rising interest rates keeping prices high and lowering demand, neither buyers nor sellers have the upper hand in 2023, making it a disappointing “nobody’s market.” About 51% of Americans think it's a bad time to sell a house, and 53% say it's an even worse time to buy, according to a new survey from Clever Real Estate.
With buyers and sellers equally poised for disappointment, here's how they're responding to current housing market conditions.
1. They're compromising their priorities
Buying a home is one of the most significant investments people will make in their lifetimes. When making such a big financial commitment, buyers understandably want to be satisfied with their purchase.
However, 93% of recent buyers say they had to compromise on their priorities — up from 80% in 2022. Compromising is often necessary to find a home, but it can also lead to disappointment.
About 93% of buyers and 95% of sellers say they had regrets about their real estate transactions in 2023. That’s up from 72% and 90% in 2022, respectively.
For buyers, purchasing a home that requires too much maintenance is the most common regret (33%), followed by buying too quickly (30%, and spending too much money (28%). The most common regret among sellers is paying too much in Realtor commission (28%).
2. Difficulty finding homes continues to grow
Although the market is less competitive for buyers in 2023, house hunters generally think it's getting more difficult to buy a home. Buyers were 47% more likely to say purchasing a home was more difficult than expected in 2023 than they were in 2022.
Buyers say they experienced more difficulty in 2023 because:
45% exceeded their budget.
42% had to accept a high interest rate.
42% found home prices were still too expensive.
Home prices remain elevated because of the housing shortage across the U.S. Many sellers aren't willing to list their home and buy a new one at a higher interest rate, leaving buyers with limited options.
3. Buyer demand is waning
High mortgage rates and expensive home prices have suppressed buyer demand, meaning homes sit on the market longer.
Sellers who still expect their homes to fly off the multiple listing service are in for a rude awakening. In 2022, 55% of homes sold in under a month, but that percentage dropped to 28% in 2023.
The longer a home spends on the market, the more likely it is that the seller will have to lower the asking price or make concessions, such as repairs, with the buyer. Sellers may also have to pay the full price of closing costs, whereas in recent years, they could ask the buyer to assume some of their costs during negotiations.
Overall, 21% of sellers regret that their home sat on the market too long.
4. Buyers and sellers are feeling financially strained
Three-fourths of buyers (75%) had to pay more than the U.S. average price of $516,500 for their home. It's no wonder more than half of recent homeowners (58%) say they overpaid for their home.
The high cost of homeownership is leaving its mark on buyers. Instead of feeling excited about settling into their new home, buyers are feeling the financial strain of new debt.
More than half of home buyers (56%) have felt in over their heads financially since buying their home, and 27% say their overall financial situation has deteriorated.
What's more, 62% of buyers say they have struggled to make their mortgage payments on time each month. As they struggle to pay their mortgage, 56% of buyers have taken on additional debt to maintain their lifestyle in an inflated economy, and 29% say their non-mortgage debt burden has gotten worse since purchasing their home.
New homeowners have had to resort to credit cards with high interest rates to pay for food, utilities, and other amenities. This trend is even more prominent among first-time buyers who are 11% more likely than repeat buyers to have to borrow additional money after homeownership.
5. Sellers aren't making as much profit
In 2022, sellers could expect to fetch high prices for their homes after a short time on the market because of great demand for homes. As demand wanes and buyers' purchasing power decreases, many sellers have had to lower their price.
As bidding wars become less common and price reductions increase, sellers aren’t making as much money, and nearly 1 in 5 (19%) regret that their home didn't sell for enough.
More than half of sellers (57%) made less than $50,000 on their home sale in 2023. By comparison, sellers made $65,000 in 2020, and they made about $94,000 in 2021.