On a weekend afternoon, stroll through an open house in the suburbs of Atlanta or outside of Phoenix, and you’ll witness something that three years ago would have appeared unthinkable. The agent is talkative and not in a rush. Two names, not twenty, are listed on the sign-in page. It has been six weeks since the listing was posted. The vendor has already lowered the price once while off-site and perhaps nervous. With a clipboard in hand and a mortgage pre-approval in a bag, the buyer has a quiet power that the US housing market hasn’t had in a long time. Surprisingly, many consumers are still unaware that they have it.
The statistics supporting the US market shift in home buying leverage are compelling enough to merit further investigation. There are currently roughly 40% more sellers than buyers, a near-record mismatch that has drastically altered the nature of negotiations at almost every price range. Although it is still high by historical standards, the national median home price has stabilized at $429,000, no longer rising at the rate that made the pandemic-era market feel like an auction that was out of control.
Although mortgage rates, which are currently in the low 6% area, are still higher than the historic lows that characterized the 2020 and 2021 frenzy, they have decreased enough that monthly expenses have fallen below the conventional 30% affordability barrier in many regions of the nation. Things are now different. Genuinely altered, but quietly and without any fuss.
The return of the contingency is the most direct type of buyer leverage. In order to make their offers more competitive, purchasers were frequently encouraged—and occasionally coerced—to waive inspection contingencies during the peak of the market. Some did, and after closing, some found costly shocks. The dynamic is now reversed. When inspections reveal problems, such as an old roof, a malfunctioning HVAC system, or water intrusion in the basement, purchasers suddenly have significant leverage.
Instead of risking losing a buyer who, unlike in 2021, has other options, sellers are agreeing to targeted repairs, granting home warranties, and offering price reductions or remodeling credits. Nowadays, most accepted offers include the seller paying all or part of the buyer’s closing expenses. During the hysteria, that seemed almost unimaginable. It’s now commonplace.
At the upper end of the market, the leverage picture appears especially bleak. Across most large metro areas, homes priced between $750,000 and $2 million, as well as condos, are sitting the longest and experiencing the biggest price drops. Buyers in this range might be holding back in anticipation of more declines, which would produce its own dynamic—longer time on market, more seller fear, and increased propensity to haggle. Some of these homes are thought to find their values before the year is out, but sellers who set ambitious prices in the hopes that the epidemic regulations would still be in effect are finding out otherwise.
Because it follows a different logic, it is important to comprehend the financial leverage aspect of the home buying leverage US market discussion independently. When a buyer makes a 5% down payment on a $400,000 property, they are investing $20,000 of their own money and gaining control over an asset valued at twenty times that amount.
The gain covers the entire $400,000, not just the down payment, if the house increases 5% over a two-year period, which is a reasonable estimate in most US markets over an extended period of time. That is a 100% return on a $20,000 investment, or $20,000 in appreciation, which was made possible by the fundamental principles of mortgage financing rather than speculation. Experienced real estate investors get this idea immediately, whereas first-time purchasers frequently underestimate it, in part because the monthly payment is the figure that draws attention while the underlying asset appreciation occurs invisibly.
