Limited inventory and rapid price appreciation have kept sellers firmly in the driver's seat for several years as the United States recovered from the housing market collapse.
But now, buyers are gaining more negotiating power as the housing market slows, especially in some of the nation's hottest markets.
In 20 of the 35 largest metros, market conditions favor buyers more than they did a year ago, according to the latest Zillow Buyer-Seller Index. The index is based on the share of listings with a price cut, how long it takes to sell a home, and the sale-to-list price ratio. By comparing each metro across time, this analysis shows whether the market is cooler (favoring buyers) or hotter (favoring sellers) than it was in the past.
California markets have seen the biggest shift toward buyers since last January, led by San Jose, which has seen the most significant swing. San Francisco, San Diego, Los Angeles and Denver round out the top five markets where buyers will have an easier time navigating the market than they would have in recent years.
Even though San Jose and San Francisco have cooled exceptionally, they are still the hottest markets compared with others around the country, markets where listings see few price cuts, homes don't stay on the market for long, and sale-to-list price ratios are higher. In these two Bay Area markets, home prices are so prohibitive, the typical buyer must put more than a 20 percent down to keep mortgage payments at or below 30% of monthly household income.
San Jose buyers would need a 49 percent down payment, or $614,100, nearly three times as much as the national median home value. Buyers in San Francisco (43 percent), Los Angeles (43 percent) and San Diego (31 percent) would also need to put down more than 20 percent.
"It is no surprise that the markets which pushed the bounds of affordability over the housing recovery are now experiencing significant cooling," said Skylar Olsen, Zillow Director of Economic Research. "As down payments and mortgage payments far outpaced incomes, buyer demand eventually exhausted itself. Those buyers looking in cooling markets will likely welcome the relief, although the entry price is still high. Inventory is returning and spending more time on market, meaning their decision making can be made with a cooler head."
While some of the hottest markets slowed down over the past year, others have become more seller-friendly. Miami – which tends to see large fluctuations – has seen the biggest overall shift toward favoring sellers over the past year, with homes selling about a week faster than they did a year ago.