"Stale Listings" Dominate the Market as Sellers Struggle to Find Willing Buyers

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Ever heard the saying, “Every home has its price?” According to a new report from brokerage and listings site Redfin, many homes have yet to find theirs.

More than half the homes in the U.S. have been sitting on the market for two months or more without finding a buyer. It’s a far cry from the post-pandemic bidding wars and multiple-offer frenzy, even as the nation still lacks housing inventory.

Redfin’s recent report shows that 52.2% of the houses for sale in late February had been on the market for at least 60 days, the highest level since 2019, totaling $347 billion in value. So, what gives?

Redfin estimates there are 630,000 more sellers than buyers. According to data from Realtor.com, days on market remain below pre-pandemic levels in many metros, suggesting a rebalancing rather than a slump.

Part of the reason for the clog in the sales pipeline is the disconnect between sellers’ expectations and what buyers can actually afford.

Mortgage Rates Have Put the Brakes on Sales

The $347 billion worth of homes for sale represents a record for this time of year and has been abetted by the yo-yo interest rates, which have made it impossible for buyers and sellers to reach an agreement on price amid the uncertainty.

Jason Gale, a Redfin Premier agent in New Orleans, said in a statement:

“Sellers know it’s a buyer’s market, but they still want to get as much money as they can for their home. So they list on the high end, expecting buyers to negotiate down, and that’s leading to listings staying on the market for a long time. There are still deals to be made, but 9 times out of 10, homes are selling for under their asking price. But sometimes, the price is just too high, and sellers have to pull their home off the market after six months or so.”

Small Investors Need to Stay Lithe and Liquid to Take Advantage

The hesitancy in the market has created small pockets of opportunity for investors in listings that have languished, where sellers might be getting antsy and looking to cut a deal. In an unpredictable market like the one we are in, it’s important to deal with hard facts rather than speculation and “what ifs.”

Immediate items up for negotiation and concessions could include flagged items from an inspection, along with some closing costs. Underwriting deals with realistic rental numbers—they have been falling in many parts of the country—and will also help you get closer to the finish line.

Where to Snag a Deal

Florida is a unique market because it’s caught between the crosswinds of surging inventory and escalating insurance costs, which have impeded home sales. According to Redfin’s data, Florida is where buyers have the best chance of striking a deal, particularly in Miami, where two-thirds (62.6%) of home listings are stale. In West Palm Beach, that number is 55.9%.

It’s a similar story in San Antonio, Texas (58.3%) and Pittsburgh (58.1%).

Conversely, if you’re looking to get a deal in the Bay Area of California, you might be waiting a while. There’s still something of a feeding frenzy amongst well-heeled Silicon Valley buyers who have the cash to throw around. In San Jose, just under 20% of the listings are “stale”—the lowest in the nation. Nearby San Francisco (24%) and Oakland (31.1%) are not far behind.

Smaller Markets Have the Biggest Opportunities

The Redfin data shows that the smaller markets in the Midwest and Northeast, where higher rates are offset by lower prices, are where homes tend to move at a clip. HousingWire data shows Michigan, Ohio, and Illinois topping the nation in absorption rates, with Detroit, Chicago, and Cleveland among the fastest-selling markets, underscoring the demand for lower-cost metros relative to supply.

A Perspective for Smaller Investors

If you plan to borrow to invest, as evidenced by the healthy absorption rates in the Midwest, your money will go a long way in lower-cost markets without incurring high risk. It’s also worth noting that higher interest rates and falling rents are causing more would-be buyers to remain renters, meaning there’s not only a healthy tenant pool but also less competition from owner-occupants.

Why Dating the Rate Is Starting to Look Like a Long-Term Relationship

The phrase “date the rate and marry the house” is often used to describe a strategy for refinancing a property when interest rates drop. However, they have been hovering in the low-6% area for a while; a short-term plunge into high-5% territory was abruptly ended by the breakout of war in the Middle East.

Although the trajectory is definitely on a downward curve if viewed over the last two years, for buyers looking for a sudden rate collapse to justify their purchases, the advice from most economists seems to be “don’t count on it.”

“This isn’t the kind of PPI (Producer Price Index) report the Fed wants to see,” Nationwide Financial Markets economist Oren Klachkin told CBS News, reflecting on the Federal Reserve’s recent decision not to touch interest rates. “This report suggests inflation was going to accelerate even before the Iranian conflict hit.”

Final Thoughts

A stale market with houses sitting unsold for two months or more is a great opportunity for buyers who can pull the trigger quickly. Sellers will be more willing to negotiate, and if you can secure deals without taking on a lot of debt, now is the time to make money because competition is low and prices are fairly stable. Additionally, many renters are still staying on the sidelines, waiting for rates to drop before buying. It won’t always be this way.

In February, the average was 15.5% of homes with price reductions nationally, with the trend expected to continue. Heading into an election season, the current administration is desperate to change the affordability narrative.

Ending the war, lowering gas prices, and easing the cost of living must be priorities. That includes lowering interest rates. Buying an investment before that happens could be prudent.

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