Why homebuyers are gaining a bittersweet edge right now

It's been difficult to sell a home for so long now that sellers are starting to get desperate.

It's a bittersweet picture for housing affordability because it may mean some power is shifting back toward buyers.

"With the passage of time, you essentially have some people really needing to move, despite the higher mortgage rates," NAR's chief economist, Lawrence Yun, told BI. "Changes in life circumstances — marriages, divorces, looking for a better school district, a new job in a different location, or a death in the family — all these life-changing events are constantly occurring, and they accumulate."

However, fewer existing homes were sold last year than in any year since 1995, according to the National Association of Realtors. For buyers, that presents a silver lining for affordability: A pent-up desire among homeowners to sell is helping reduce competition among buyers. For those buyers who can — or must — brave the market, power seems to be shifting in their favor as listings rise relative to the number of house hunters.

While home prices are still trending upwards in tight housing markets across the Northeast, Midwest, and Southern California, they're falling in many markets in the South and Southwest. Price cuts, particularly in the South and West, are becoming more common, and the length of time the typical US home sat on the market — an indicator that prices may continue to soften — has risen for almost a full year, Realtor.com reported.

Homebuyers are "not getting into bidding wars as often," Daryl Fairweather, Redfin's chief economist, told BI. "Because there are fewer buyers, they have more negotiating power."

The way things are going, she added, some sellers will need to cut their asking prices. But that doesn't mean they won't get a good deal. Home prices are still 45% higher than they were just before the pandemic, according to Redfin.

Are you putting your move on hold or struggling to sell or buy a home? Share your story with this reporter at erelman@businessinsider.com.

An uncertain future

After home prices soared amid the pandemic and the Federal Reserve hiked interest rates in 2022, many homeowners who'd bought or refinanced during the period of super-low mortgage rates in 2020 and 2021 opted to stay put. US home sales hit rock bottom in 2023 and 2024, as prices stayed high.

Although the "lock-in" effect is easing, housing affordability is expected to stay dismal in many markets across the country this year.

Before the 2024 election, economists and housing researchers expected cooling inflation and interest rate cuts to boost home sales in 2025. But President Donald Trump's tariff threats and other federal policy changes have scrambled that picture, creating uncertainty that is keeping mortgage rates elevated and buyers out of the market. Now, it looks like mortgage rates are staying closer to 7% rather than cooling off as hoped.

While we're still waiting to see the full impacts of major federal policy shifts on the housing market, consumers are already reacting. Consumer housing sentiment is down year-over-year for the first time since 2023, driven by the belief that mortgage rates won't come down as quickly as previously thought, according to new data from Fannie Mae. While the percentage of people who said it's a good time to buy a home rose from 22% to 24%, the portion who said it's a good time a sell a home fell from 63% to 62%.

"If you're not sure what's going to happen in the US economy, then you probably don't want to make a massive financial decision," Hannah Jones, an economic research analyst at Realtor.com, told BI.

Broader consumer sentiment has plummeted under Trump, falling 22% since December, according to recent data from the University of Michigan. Consumers expect inflation to rise over the next year, and their confidence in the job market, stock market, and their own personal finances is down.

It's still possible this could all change. If Trump lifts his tariffs, inflation subsides, and the economy remains resilient, mortgage rates could come down and we could see a housing market recovery, Fairweather said.

"We're kind of in this in-between time, intercession if you will," she said. "There's maybe like a 20% chance that everything turns around in time for the spring season."