A growing number of home sellers are lowering prices, a potential signal of easing housing costs after record-setting growth, according to Redfin. Some of the hottest markets over the past year are now seeing the greatest shares of reductions.
Nearly one in five, or 19.1%, of sellers across the U.S. dropped prices over the four-week period ending May 22, the highest percentage since October 2019, according to the real estate brokerage. Other metrics tracking buyer demand, including time on the market and the share of properties sold above list price, have also leveled off, Redfin reported.
“The picture of a softening housing market is becoming more clear, especially to home sellers who are increasingly turning to price drops as buyers become more cost-conscious under higher mortgage rates,” said Redfin Chief Economist Daryl Fairweather in a press release.
Metropolitan areas that saw a surge of new incoming residents who drove up housing demand over the past two years are among the markets with the highest percentage of price drops in the last month.
Boise, Idaho, which saw a 62% surge in housing costs over two years, led the U.S. in share of price reductions in April, with 41% of its sellers lowering asking prices. Several other popular cities for relocation, including Atlanta, Phoenix, San Antonio and Tampa, Florida, also saw more than 20% of sellers adjust prices downward.
“When mortgage rates were at or below 3%, both local and out-of-town homebuyers were more willing and able to tolerate high prices, but at 5%, many are now priced out,” Fairweather said. Freddie Mac’s benchmark 30-year interest rate has jumped almost 2 percentage points since the end of 2021 and currently averages 5.1%.
In second place behind Boise was Cape Coral, Florida, where 33% of property sellers dropped prices. Rounding out the top five were New Orleans at 32%, Baton Rouge, Louisiana with 31% and Sacramento, California at 30%.
Despite indications that the housing market looks to be approaching the end of its prolonged upswing, costs still remained elevated in the four-week period from mid April to mid May compared to a year ago, Redfin said. The median home sale price came in at $400,000, 16% higher on a year-over-year basis, while the median asking price also climbed 17.8% to a record of $418,000.
Along with Redfin’s research, data from several other organizations also suggests the combined forces of high costs and rising interest rates have left a clear dent in home buying demand. Purchase originations are down by over 16% year over year, not far off its level in early 2020, according to the Mortgage Bankers Association. The MBA also recently revised its forecast for 2022 purchase originations downward. Pending sales fell in April for a sixth straight month, according to the National Association of Realtors.