If you’re looking to buy a home, you may want to prepare yourself for disappointment.
A new study from Realtor.com found that there is a large gap between the home price buyers are looking for and the listed prices. Half of today’s home shoppers want to purchase a property for under $288,000, the study found, based on an analysis of Realtor.com home-search data. That’s 9.1%, or $27,000, below the median price of homes currently on the market.
Closing that gap won’t come easily. Realtor.com estimated that roughly 94,000 homes priced between $100,000 and $340,000 would need to be put up for sale to achieve equilibrium. However, that would represent a 15% increase in the number of listings in this price range – homes priced above $750,000 is currently where inventory is growing the most, and even then there are only 11% more homes for sale in that price tier.
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The largest discrepancy between what buyers want and what’s on the market, per the study, is in Cincinnati, where the median list price ($275,045) is nearly 22% higher than the median closing price ($215,000). The study used closing prices as a proxy for what buyers are looking for, since these were homes that they were willing to purchase. Houston had the second largest discrepancy, followed by Minneapolis and Indianapolis.
(Realtor.com is operated by News Corp NWSA, +0.38% subsidiary Move Inc., and MarketWatch is a unit of Dow Jones, which is also a subsidiary of News Corp.)
Realtor.com’s report also pointed to April data from the National Association of Realtors, which showed that the median sales price of homes sold two months ago ($267,000) was 15% below the price of all the homes available for purchase.
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“The price differences between what buyers are searching for, closing on, and what’s available on the market demonstrates just how big the gap is for entry-level home buyers,” Danielle Hale, chief economist for Realtor.com, said in the report.
“Entry-level homes continue to be difficult to come by as the inventory composition shifts more and more toward higher priced homes,” Hale said. “This is causing smaller and more affordable homes to appreciate rapidly, resulting in a mismatch between what buyers are able to spend and what sellers expect to receive.”
Hale argued that this gap explains why the rate of home sales is down 4% year-over-year. Making matters worse, the low inventory of entry-level homes has caused their prices to rise 3.5 times faster than mid- to large-sized homes.
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