“Is it a buyer’s or a seller’s market right now?”
We hear this question often. It’s a bit like asking, “What is the weather like in the U.S. today?” Well, like the current housing market, it’s hot here and cold over there. Earlier this year, we saw buyers wait for declining home prices and scant competition, while many sellers expected the soaring prices and intense competition we experienced in 2021. But things have changed.
Now, more sellers are sitting on the sidelines – many feeling locked in their current interest rates – and as a result, supply is dwindling. In fact, new listings are the lowest they’ve been since 2004 in markets where Opendoor operates. Yet, buying appetite remains.
Locked in this period of expectation versus reality, we surveyed people across generations and around the U.S. to understand the different mindsets of buyers and sellers, including what keeps them up at night, what they expect in home offers, and which party has the upper hand. Here’s what we found.
Buyers and Sellers Agree: It’s Tough Out There Right Now
When it comes to the current state of the housing market, our data revealed three things buyers and sellers clearly agree on: they believe it’s still competitive; both sides are very concerned about interest rates; and they think homes are overpriced.
It was surprising to learn that people feel homes are overpriced right now because we’re not seeing buyers postpone their moves. In fact, they are purchasing homes at a very fast rate. Market clearance across the country, which is the percentage of inventory sold each day, is around 3% – a very healthy sell-through rate. So much so that homes are selling faster in 2023 compared to 2019, a year when new construction rose, home purchases increased, and affordability went up. Based on this survey, there seems to be a disconnect between how people are feeling and what they are actually doing.
When it comes to competition, the majority of surveyed buyers and sellers (65%) believe homes on the market will get multiple offers. And this could be why only half of buyers (50%) said they feel confident they can purchase a home easily, and anticipate they’ll have to enter a bidding war. This sentiment is highest among younger would-be buyers who are more pessimistic about their chances of winning their dream home.
Since the shell shock of the 2008-09 financial crisis, the housing supply has gotten tighter and Gen Z and Millennials have entered the real estate market. Because fewer homes can mean more competition, haggling seems to have become the norm for younger buyers. But does it have to be that way forever? We don’t think so.
Further, close to 70% of buyers and sellers think homes are unreasonably priced. Of those, a whopping 93% think homes on the current market are overpriced.
When asked about housing market concerns, both buyers and sellers ranked interest rates first, with home affordability and a weak economy coming in second and third, respectively. Economic concerns may be creating hesitancy, resulting in some buyers and sellers opting to postpone their move altogether. Those postponing are more likely to say that housing affordability is one of their top two concerns about the housing market compared to those not postponing their move (56% vs. 48%).
Moreover, only 43% of postponers have 50% or more equity in their homes, compared to 53% of active movers. And, postponers are less likely to own their home outright – 20% compared to 30% of active movers. Greater wealth likely results in more flexibility for moving and the ability to make a stronger offer, which is why those actively moving are willing to stomach higher interest rates for the right home.
Concerns about the real estate market increase with age, especially when it comes to interest rates. Baby Boomers are the most concerned (86%), likely due to the fact that they’ve lived through volatile interest rate conditions before. Gen Z was the least concerned at 62%, with Millennials (75%) and Gen X (77%) somewhere in between.
Surprisingly, respondents weren’t alarmed by the lack of housing supply. Only 34% of buyers and sellers cited the lack of supply as a concern, even though data shows there is significant underbuilding in the U.S. The lack of housing supply is likely a big driver pushing home prices up and affordability down. While people aren’t worried about supply, 72% are worried about the byproduct of it: low affordability.
What About the Future? Depends on Which Generation You Ask.
While more than 60% of buyers and sellers agree the economy will struggle this year, there’s some disagreement when it comes to pricing expectations and predictions. On the question of whether home prices will increase in 2023, buyers and sellers are evenly split. But looking across generations, the divide increases: more younger respondents anticipate rising home prices compared to their elders.
When it comes to actually making offers, sellers and buyers expect different things. The majority of buyers (73%) plan to bid at or below the asking price, while 36% of sellers expect an offer above the asking price.
These expectations are consistent across age groups though more exaggerated: Baby Boomer buyers are hunting for deals. Some 80% say they intend to make an offer on a home at or below the asking price, and only 14% are willing to make an offer above.
Finding Common Ground: Where Buyers and Sellers of All Ages Can Coexist.
When it comes to perceived negotiating power, most of our respondents agree that sellers still have the upper hand. This may be residual sentiment from the hot seller’s market during the pandemic or the general undersupply of housing, but it still begs the question: can buyers and sellers find common ground? We believe the answer is yes.
Since sellers still have a perceived edge, it’s important to understand exactly what they want. Our data highlights three imperatives: certainty, speed, and cash.
The majority of sellers (87%) say the certainty of an offer not falling through is extremely important to them. But with many buyers facing financing challenges and searching for a better deal, the rate of contract cancellations has increased significantly. Today, 18% of home sales fall through — the second-highest percentage since 2014. Additionally, 74% of sellers want to sell as quickly as possible, and 58% of sellers say receiving a cash offer is important.
The good news is that both prospective sellers (76%) and buyers (80%) indicate a willingness to make concessions to expedite their process. The top three concessions buyers and sellers are willing to make? Flexibility on the closing date, paying for inspection fees, and paying for closing costs.
While we report on buyers and sellers separately, in reality, these populations overlap – 72% of sellers are also buyers. This means that if it’s hard to buy, it’s hard to move forward with their sale. So rather than debating whether it’s a seller’s market or a buyer’s market, our hope is that given the right tools and resources, home sellers and prospective buyers across generations can find a home they love and afford.
Whether you’re a Gen Z buyer hesitant to move forward because of prices or a Baby Boomer seller ready to move, Opendoor has solutions. See how we can help today.
Methodology: This is a survey of current and prospective (next 3 years) home buyers and sellers of all demographics between the ages of 21-75. A total of 833 interviews were conducted nationally in March 2023.
Amit Arora is the VP, Head of Investments at Opendoor