The landscape of the housing market is experiencing a shift in price trends, with reports indicating that some of the heat is coming out of home prices. While prices still remain higher compared to a year ago, the rate of increase is starting to slow down. According to recent data from real estate brokerage Redfin, the typical house sold for slightly less than its asking price, marking a decrease of 0.3% during the last four weeks ended June 23. This is a significant change from a year ago when homes were selling at list price, and even further back when they were selling above list price.
Although the housing market is not crashing, there are noticeable shifts in the dynamics. While a majority of homes continue to sell over asking price, there has been a decline in the share of homes selling above asking price, reaching its lowest level since June 2020. Sellers are starting to realize that they may not be able to command as high prices as they initially expected, leading to more realistic pricing strategies.
One major factor contributing to the cooling of the housing market is the stubbornly high mortgage rates. The average rate on a 30-year fixed mortgage has remained above 7% for the past three months, making it more challenging for buyers to afford higher-priced homes. Additionally, supply is beginning to build up, with total active listings now 35% higher than they were a year ago. While this increase in supply is helping to ease price pressures, inventory levels are still down more than 30% from typical pre-pandemic levels.
As the housing market undergoes a period of adjustment, both buyers and sellers need to reconsider their strategies. Buyers should be cautious about assuming they can get a deal in the current market, as not all homes are selling below asking price. On the other hand, sellers need to be realistic about pricing their homes competitively to attract buyers. According to Marije Kruythoff, a Los Angeles Redfin agent, some sellers believe that every home will sell for top dollar regardless of its condition, which may not be the case in the current market environment.
The cooling housing market is signaling a shift in price trends, with price gains starting to shrink and sellers adjusting their expectations. Buyers and sellers alike need to be aware of these changing dynamics and adapt their strategies accordingly to navigate the current market conditions effectively.