Which is a better investment: buying a home or investing in stocks?
Since 1995, stock prices have outperformed home prices by a factor of four, but which is actually the better investment for building wealth?
They say what comes around comes around. But when it comes to the housing market, normal cycles took time to arrive.
But now a new analysis calls “the U.S. seller’s market over.”
A report released June 11 by Realtor.com declares, “The days of bidding wars are over.” The authors write that for too long, sellers have had a “free pass” when it comes to pricing their homes. But no more.
“Right now, overpriced homes aren’t just sitting around; they’re aging, they’re becoming less leveraged, and they’re selling for less than they would have if they had been priced in the first place,” Joel Berner, the firm’s senior economist, said in a report comparing home sales data and Realtor.com listing history.
“If you price it right, buyers will come to you,” Varner added. “If you price it wrong, you’re going to come after them. It’s been four weeks and the market has already made its verdict. Either you have a competing offer or you lower the price.”
In fact, home sales that close after four weeks fetch 1.8% more than asking price than most homes in the same time period. After 18 weeks, those still on the market end up selling for 1.3% less.
Although housing remains unaffordable for too many Americans, the situation is changing, Berner wrote. “Buyers have more influence than they have in years, and it’s clearly visible in the data.”
After crazy bidding wars during the pandemic, it’s a “real paradigm shift” now, said Steve Reese, a real estate agent and owner of Soled on Shawnee in the Oklahoma City metropolitan area.
Reese told USA TODAY that homes that are presented well and priced well will sell. Even though buyers now have more options and are taking the time to make good decisions, “there are still agents out there who do a very average job,” he said.
In particular, the real estate agent’s analysis found that buyers in the $750,000 to $2 million range may have the most influence. The final number of homes sold in these price ranges is the lowest below asking price, as 2022, at the height of the pandemic rush, saw more bidding wars than average.
Another segment of the market that is lagging behind is condominiums. The average single-family home sells for 99.2% of asking price, while condos sell for an average of 97.9%. Meanwhile, list prices for condos are down 6% compared to March 2022, even though list prices for single-family homes have increased 7.5% since then.
Condominiums have been hit hard by rising costs associated with ownership, such as HOA dues and homeowners insurance. In the wake of the Surfside, Florida, condominium collapse, many buildings are increasing their financial reserves and taking steps to prepare for increased risk due to increased assessed common area fees.
With all this in mind, “real estate is very local,” Reese says.
