4 Signs Your Local Housing Market Is Cooling

Consider all of these a positive thing.

The 2022 housing market has been extremely tough for buyers to crack. Not only have home prices remained elevated, but mortgage rates have risen sharply since the beginning of the year. That's created a major affordability problem for a lot of buyers -- notably first-time home buyers.

Part of the reason the real estate market has been so difficult is due to limited inventory. Any time there's not enough supply of a given commodity, its price tends to rise. That's what's been driving up home prices. And at a time when it costs so much to borrow via a mortgage, that's a problem.

But the housing market isn't going to stay this way forever. And while it may take a while for things to improve for buyers on a national level, some specific markets might start to open up sooner. Here are a few signs to look out for that indicate your local market is cooling -- and that there may soon be an opportunity to make an offer on a home.

1. Bidding wars are less common

Bidding wars were a mainstay in the real estate market throughout 2021 and for a good part of 2022. But if your real estate agent tells you that they're starting to see fewer bidding wars in your neck of the woods, it's a sign that the market is cooling -- either because more homes are becoming available, or because buyer demand is shrinking.

2. Inventory is picking up

An uptick in housing inventory is really what's desperately needed to bring home prices down to more affordable levels. If you start to see an uptick in listings in your area, take it as a sign that your local market is cooling -- and that sellers are starting to lose some of the edge they've managed to retain over the past couple of years.

3. Home prices are coming down

One of the surest signs that a given housing market is cooling is lower listing prices. If earlier this year, the average home in your area had a listing price of $450,000, and you're now seeing most listings go up for $420,000, it should give you something to be hopeful about.

4. Homes are sitting on the market longer

At many points in 2021 and 2022, homes would fly off the market within days of being listed. But if you're starting to see homes sit on the market for weeks or months without being scooped up, it's a sign that buyers aren't rushing to purchase them. And that gives you a lot more negotiating power.

There are already some signs that the housing market is starting to calm down on a national level. But sellers still, unfortunately, have the upper hand due to inventory shortages.

That could change a lot in the coming year, though, so it's a good idea to keep tabs on not just the real estate market in general, but your local market. Once you see that things are starting to cool off, you can work with your real estate agent to develop a strategy that allows you to snag a home at a price point that works for you.