Redfin, a technology-focused real estate brokerage, today released a series of statistics that illustrate some of the positive effects of the current housing market cooling. After nearly two years of a highly competitive market, once-rejected buyers finally have another chance to buy the home they’ve always wanted, even with higher mortgage rates making the purchase slightly more expensive. The slower market also means home hunters may start to include contingencies like appraisals and inspections in their offers again.
Other indicators that show the bright side of this cooling market include:
- Houses are cheaper than they were in the spring. Home selling prices and asking prices are both down 6% from the record high reached in June.
- Homes are finally selling below their asking price. The typical home sold below its asking price in August for the first time since March 2021, meaning buyers are successfully negotiating prices lower than was essentially unheard of at the height of the housing frenzy. buying pandemic homes.
- Homebuyers have more choices. The total number of homes for sale rose 4.2% year over year in August. The supply for sale has been increasing year on year since June after a severe shortage in the number of homes for sale that began even before the pandemic.
- Competition for homes dies down. Nationally, 44% of property offers written by Redfin agents faced bidding wars in July, the lowest share on record except for April 2020.
In July 2022, 53 homes in Austin, Texas sold for at least $100,000 above their asking price, or about 2% of all homes sold during the month. That’s down from 163 (4.7% of all homes sold) a month earlier and 362 (9.1%) a year earlier, near the peak of the pandemic homebuying spree.
It’s a prime example of the housing market downturn giving buyers pause after nearly two years of an ultra-competitive environment. The average 30-year fixed mortgage rate nearly doubled from a year ago, hitting 5.66% in the week ending September 1. After expensive to buy a home after two years of skyrocketing prices, the upside is that they’ve thrown some water on the scorching market.
“At the end of the day, the news that house prices are finally starting to come down as bidding wars become less common is better than not,” said Jacob Channel, senior economist for LendingTree, a lending market. on line. “While some current homeowners may be disappointed to learn that they cannot immediately sell their home above the original asking price as easily as they could over the past two years, the reality is that the housing market Housing has become far too expensive for many homebuyers. This is especially true given the rise in mortgage rates this year.”
“That said, while this latest news will likely be welcomed with open arms by homebuyers, prices remain high and so do rates,” Channel said. “It should also be noted that even if prices are falling, there is still not much reason to expect the housing market as a whole to crash or collapse in a major way. As a result, while home buyers may find it easier to buy a home in the coming months, those expecting prices to fall should likely readjust their expectations.
Redfin has also compiled some of its latest housing market statistics illustrating the bright side of the cooling market for buyers.
- Home prices drop year over year in some expensive metros. San Francisco (-3.7%), Oakland, Calif. (-3%) and Honolulu (-3.6%) all saw year-over-year declines in their median selling prices in August.
- Homes are finally selling below their asking price. The typical home sold below its asking price in August for the first time since March 2021. Over the past year and a half, the typical home has sold for more its asking price. This means buyers are successfully negotiating prices lower, which was essentially unheard of during the height of the pandemic home-buying frenzy.
- Homebuyers have more choices. The total number of homes for sale rose 4.2% year over year in August. The supply for sale has been increasing year on year since June after a severe shortage in the number of homes for sale that began even before the pandemic. Although the supply has decreased slightly compared to the previous month in August, it should stabilize.
- Competition for homes dies down. Nationally, 44% of real estate offers written by Redfin agents faced bidding wars in July, the lowest share on record except for April 2020, when the pandemic crippled the housing market. Thirty-seven percent of homes sold above their asking price in August, the lowest share since the start of 2021 and down from 50% a year earlier.
- Buyers have more time to see homes on the market. The typical home was on the market for 26 days before being contracted in August, up from the record low of 17 days set in June. Thirty-five percent of homes were taken off the market in two weeks, up from 43% a year earlier.
- There are fewer buyers in the market. Home sales fell 19% year-over-year in July to their lowest level since the start of the pandemic. This reflects nerves around high mortgage rates and a volatile economy, but it also means buyers who can afford a home naturally have less competition for the one they want.
- Patient buyers can get a deal. The share of homes listed for 30 or more days without going through a contract rose 12.5% in July from a year earlier, giving buyers some time and some bargaining power. A record share of home sellers are dropping prices, with only about 8% of homes for sale each week in August seeing a price drop — and the share is much higher in pandemic boom cities like Boise and Sacramento.
- Buyers are less likely to face competition from investors. Investor home purchases plateaued in the second quarter after surging in 2021, making it less of a hurdle for repeat buyers.
Homes are still 5.9% more expensive than a year ago, but this is the slowest growth rate since the start of the pandemic. And there are ways around high mortgage rates: buyers can take out an adjustable-rate mortgage, which tends to have lower initial rates, or they can refinance in the future.
“Sellers are losing some of their leverage, which is helping buyers, who have been going through the spin for the past two years,” said Raleigh, Redfin agent in North Carolina, Jordan Hammond. “Buyers are thrilled that homes are staying on the market longer and some sellers are even lowering their prices. I remind buyers that relatively high mortgage rates should not stop them if they are serious about finding a new home, as they are still historically low.
The slower market also means home hunters can include contingencies like appraisals and inspections in their offers.
“Buyers today negotiate and they expect sellers to work with them,” said Redfin agent Angelica Webb. “If a buyer offers $35,000 less than the asking price and the seller offers a reduction of $10,000, the buyer can walk away from the transaction. If they ask for a repair after the inspection and the seller refuses, they can walk away. Three months ago, a buyer was very unlikely to make an offer below the asking price or walk away after an inspection. But now that there are more homes for sale and fewer buyers, they can simply look at similar properties with recent price reductions or make an offer to a seller who is willing to negotiate.