The decline in the housing market after its high-flying days at the start of this year is worsening, with July home sales falling for the sixth month in a row.
Significantly higher mortgage rates, runaway inflation and prices that remain near historic highs are making homes less affordable. Sales fell 20.2% from July last year, hitting the slowest pace since May 2020, near the start of the pandemic.
But the downturn has started to tip the home-buying equation, albeit ever so slightly, in favor of home hunters who can afford to stay in the market and away from sellers, who had previously been able to offload their homes at prices they may never have dreamed of.
Homes still sell very quickly, on average, and many continue to receive multiple offers. But many sellers have had to become more flexible on their asking price and find they can no longer require potential buyers to give up important guarantees like a home inspection before closing the deal.
The change doesn’t mean it’s now a buyer’s market – it will take a big increase in the number of homes on the market before that happens. Still, it’s a notable reversal after a housing shortage, rock-bottom mortgage rates and soaring house prices have skewed the housing market heavily in favor of sellers in recent years.
“We know homes take longer to sell, sellers need to price more carefully and need to adapt if they’re not priced competitively,” said Danielle Hale, chief economist. for Realtor.com. “So it’s moving in a buyer-friendly direction, but I’m not sure it’s quite there yet.”
New data shows a somewhat mixed picture for the housing market, with sales continuing to decline while the tight inventory of properties for sale pushes prices up.
The National Association of Realtors said Thursday that sales of existing homes fell 5.9% last month from June to a seasonally adjusted annual rate of 4.81 million. Excluding the pandemic slowdown, sales in July were at the slowest pace since November 2015, NAR said. The last six-month losing streak was between August 2013 and January 2014.
Despite the slowdown in the market, many sellers are still receiving multiple offers. A typical home received 2.8 offers last month, though that was down from 4.5 offers a year earlier, NAR said.
Nicholas Brooks and Nathan Giddings put their four-bedroom, 2.5-bathroom home in Flower Mound, Texas, about 20 miles northwest of Dallas, on the market in early June for $575,000 and received several offers. They ended up accepting an offer of $645,000, but it fell apart soon after. The couple, who now live in Portland, Maine, put the house up for sale a few weeks later but ended up accepting an offer of $615,000.
“We started out super optimistic, we got a ton of offers versus requests, then clearly a month later it was a few offers and a lot less,” said Brooks, systems analyst. “We really thought that if we left it on the market, the offers would get lower and lower.”
Even though the housing market is running out of steam, house prices have continued to rise sharply. The national median home price jumped 10.8% in July from a year earlier to $403,800. But earlier in the year, prices were climbing about 20% annually.
Before the pandemic, the median house price was rising about 5% a year, said Lawrence Yun, chief economist at NAR.
“So it’s still going up quite steeply, even though it’s slowing down from an overheated pace,” he said.
At the start of the year, when the real estate market was still hot, competition fueled bidding wars that often resulted in homes selling within days of listing and well above their price. registration. However, as the market has cooled, the difference between the price at which homes are listed and what they end up fetching has narrowed nationwide.
In January, the median sale price of homes in the United States was 14.4% lower than the median listing price, but in May the difference increased to 19.5%, according to an analysis by Realtor.com. Even in a hot market, nationwide, homes typically sell for below asking price.
The data suggests that some metro areas where homes averaged above asking price have fully reversed and are no longer sellers’ markets as buyers regain more leverage to negotiate a more favorable price.
For example, in the Memphis metro area, the median home sale price in January was 11.1% higher than the median listing price. That reversed in May, with the median sale price 11.4% lower than the median listing price, according to Realtor.com.
The trend is not limited to any particular region. Among these less favorable locations for sellers are the metro areas around Honolulu, Miami, Detroit, Milwaukee and Little Rock, Arkansas.
Another sign that the market has turned around more favorably for buyers: the surge in real estate advertisements, the price of which has been reduced. In January, before mortgage rates began their steep rise, only 6.4% of U.S. homes listed for sale had their asking prices reduced, according to Realtor.com. This rose steadily throughout the year, reaching 19.1% in July.
“Sellers need to lower their price to more realistic terms or a little below what they want,” said Jessie Rittenhouse, agent at Century 21 in the Dallas-Fort Worth metro area.
Additionally, sellers sometimes offer to pay buyers’ closing costs or give them thousands of dollars to offset the impact of rising mortgage rates, Rittenhouse said.
Yet competition for the most affordable homes remains tight, even as overall demand has cooled.
An analysis of home sales by Zillow shows that sellers whose homes are in the bottom third of the market reduce their asking price less frequently than those who sell homes in the middle and upper segments of the market.
This is true in more expensive markets, such as Los Angeles, New York and Seattle, as well as more affordable markets such as Atlanta, Kansas City and Tampa, the real estate data company found.
For first-time home buyers and those looking for properties at the lower end of the price bracket, this means their prospects for home ownership aren’t necessarily improving.
“Affordability has plunged to the lowest level in 30 years,” Yun told NAR. “That’s why home sales are down.”