The Buyer's Advantage: How Declining Seller Participation is Reshaping Real Estate Investment Opportunities

The U.S. housing market has entered an inflection point. After years of seller dominance fueled by low inventory and soaring prices, a structural shift is underway. Rising inventory levels, prolonged days on market, and a growing share of price reductions signal a market tilting toward buyers—a trend that creates fertile ground for strategic investors. Let's unpack how declining seller participation is reshaping opportunities and where to find undervalued properties.

The Data Behind the Decline in Seller Participation

The most striking indicator is the surge in housing inventory. Active listings rose by 30.6% year-over-year in April 2025, marking the 18th consecutive month of growth and surpassing pre-pandemic lows. Yet inventory remains 16.3% below 2017–2019 levels, suggesting lingering supply constraints. What's driving this? A combination of factors:
- The "lock-in effect": Homeowners holding onto homes to retain low mortgage rates from pre-2022 refinancing waves.
- Reluctance to sell: A quarter of sellers have lived in their homes for over 21 years, indicating emotional attachment or skepticism about current market conditions.
- Affordability barriers: To buy a median-priced home now requires an income of $114,000 annually, up 70% since 2019, deterring would-be sellers from chasing higher prices.

This reluctance has slowed new listings. While new listings increased 9.2% year-over-year, this is down from March's 10.2% pace, and the Midwest and Northeast lagged with growth of just 5.2% and 12.4%, respectively.

The Impact on Pricing and Days on Market

The inventory surge has extended the time homes spend on the market. The median days on market reached 50 days in April 2025, a 4-day increase year-over-year, with markets like Nashville and Memphis seeing delays of 16 days or more. While prices remain flat nationally—median list prices rose just 0.3%—the picture is uneven:

• Sun Belt struggles: In Phoenix, Tampa, and Jacksonville, 30%+ of listings saw price reductions, reflecting affordability pressures and slowing demand.
• Northeast premiums: Price per square foot in the Northeast rose 4.2%, underscoring its status as a seller-friendly outlier.
• Value in the South and West: While median prices dipped slightly (-0.4% in the South, -0.5% in the West), price per square foot grew, suggesting buyers can secure space at better ratios.

Where to Find Undervalued Properties

The shift to buyer-friendly conditions creates two strategic opportunities:

1. Overbuilt Sun Belt Markets
   Regions like Texas, Florida, and Arizona—where new construction has flooded the market—now offer discounts. For example:
2. Denver: Inventory surged 90% year-over-year, with price per square foot up 1.2% but median prices down 0.5%.
3. Phoenix: A 31.3% share of listings saw price cuts, making it a prime spot for investors willing to hold for long-term appreciation.

1. Undersupplied Northeast and Midwest Coasts
   Despite weaker inventory growth, these areas remain attractive due to inelastic demand from tech hubs and urban amenities. However, investors should focus on secondary markets like Providence or Cleveland, where price increases (+11.5% and +7%, respectively) haven't yet matched the South's inventory growth.

The Risks and Investment Playbook

• Mortgage rate volatility: A return to 2022's 7% rates would further dampen demand. Investors should prioritize properties with rental upside or cash flow.
• Regional disparities: Avoid Northeast and Midwest metros still 44–55% below pre-pandemic inventory unless they offer unique economic drivers.
• Target price-reduction listings: The 18% of listings with price cuts in April 2025 represent undervalued assets, especially in Sun Belt areas with stabilizing demand.

Conclusion: A Buyer's Market Requires Patience

The real estate landscape of 2025 is one of contrasts. While the South and West offer discounts and inventory surpluses, the Northeast and Midwest remain constrained by supply shortages. Investors who focus on regional divergences—buying in overbuilt markets with strong long-term fundamentals or underpriced gems in constrained regions—can capitalize on this shift.

The key is to act decisively but selectively. Use tools like price-per-square-foot ratios and days-on-market trends to identify undervalued properties, and pair purchases with markets experiencing job growth or demographic shifts. The era of seller dominance is over—those who adapt will thrive.

Investment advice: Consider REITs with exposure to Sun Belt multifamily housing (e.g., Equity Residential), or target single-family rentals in Texas/Florida. Avoid speculative markets with rising inventory but stagnant wage growth.