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Exploring the Impact of Buyer/Seller Price Disparities on Home Purchases

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It would be ideal if what sellers were asking for homes and what buyers were willing and able to pay matched up, but this isn't the reality in the current market. According to a new study released by realtor.com, there is still a large gap between these two figures, and it widens even more in certain markets.

The Gap Between What Home Buyers and Sellers Want

A new realtor.com study finds that half of all homebuyers are searching for a home priced below $288,000, but this is 9.1% short of the median price of all currently available homes. This demonstrates a significant gap for entry-level buyers.

Researchers estimate that the only way to achieve a balance between what is for sale and what buyers want is for roughly 94,000 homes to be listed from $100,000-$340,000. Unfortunately, the homes seeing the highest rates of inventory growth lately are those priced above $750,000 instead of the more affordable ones.

What Areas Are More and Less in Alignment?

This imbalance is more evident in certain areas and less in others. For example, the five areas in which homebuyers are most likely to find what they want and the median list prices of homes are:

  • Buffalo, NY ($194,950)
  • Memphis, TN ($219,950)
  • Baltimore, MD ($329,050)
  • Pittsburgh, PA ($189,950)
  • Philadelphia, PA ($279,950)

On the other hand, the disparity is much larger in other cities. The five markets where buyers will find it the most difficult to get what they want and the median list prices include:

  • Cincinnati, OH ($275,045)
  • Houston, TX ($324,950)
  • Minneapolis, MN ($370,050)
  • Indianapolis, IN ($284,950)
  • Atlanta, GA ($339,050)
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Housing prices are even beginning to flatten in some of this nation's most expensive markets. For example, Seattle home prices dropped 1.2% in May from the prior year, after years of an upward climb. Home prices in Manhattan are also falling, which some experts attribute to the elimination of the SALT deductions. So far this year, those prices are down about 5%.

Prices are also a function of supply and demand. In many areas, there's simply a shortage of homes on the market at a particular price point, which drives up prices because too many buyers are in competition. A recent study by Freddie Mac concluded that more seniors are opting to age in place, meaning they are staying in their homes longer, which can shut out first-time homebuyers.

How Buyers and Sellers Should Respond

One advantage that homebuyers have over sellers seems to be access to more current information. In other words, sellers are often pricing their homes based on dated comps, which may not be realistic in a quickly changing market.

Buyers that continue to stay updated with the latest market data can take advantage of this and find some deals. There are particularly some opportunities toward the end of the year when there is less participation in the market.

Analyzing the most current home data is just as vital for sellers. Because these disparities exist, any home that sits on the market for sale too long could be overpriced. Having a personal attachment to a home is understandable, but this won't help with a sale.

Experts advise that sellers shouldn't over-rely on agents for pricing, either. This is because some could under-price a home to get a quick sale and commission instead of helping their clients get the best deal possible.