Following a year and a half of increased homebuyer competition, bidding wars and record-low inventory, a new report finds the typical home is now selling for less than its asking price.
For the first time in more than 17 months, the average home sold for under its list price, for the four weeks ended Aug. 28, when the average sale-to-list ratio fell below 100%, according to a Redfin report.
Home prices are coming down and demand is still falling, a fact Redfin attributes to another spike in mortgage rates as they hit their highest since June. Mortgage applications, pending sales, new listings and overall inventory had large declines last month.
Redfin chief economist Daryl Fairweather said while the cooldown appears to be tapering off, there are signs there is more room for the market to ease further.
“The post-Labor Day slowdown will likely be a little more intense this year than in previous years when the market was super tight,” Fairweather said. “Expect homes to linger on the market, which may lead to another small uptick in the share of sellers lowering their prices. Homebuyers’ budgets are increasingly stretched thin by rising rates and ongoing inflation, so sellers need to make their homes and their prices attractive to get buyers’ attention during this busy time of year.”
Redfin found fewer Google searches for “homes for sale” during the week ended Aug. 27, down 26% from last year. Its Homebuyer Demand Index, which measures requests for tours and other services, rose 15% from June’s 2022 low but was down 3.22% from January.
Additionally, mortgage applications fell 23% from last year (and were down 2% week over week) as the 30-year mortgage rate rose to 5.66% for the week ended Sept. 1, down from this year’s 5.81% high but up from 3.11% at the start of the year.
In the four weeks ended Aug. 28, active listings rose 4.2% year over year but fell 0.9% from the previous four weeks. The median asking price rose 9% from 2021 to $379,194, down 5.8% from May’s all-time high. Meanwhile, the median sale price increased 6% year over year to $370,000.
New listings had their largest decline since May of 2020, falling 16%, while active listings were down 1.7% from last year, while active listings rose 4.2% year over year.
Thirty-five percent of homes that went under contract had an offer within the first two weeks, down from 43% last year, and 37% of homes sold above list price, down from 50% last year.
The report also noted the monthly mortgage payment on a median asking-price home was $2,306 at the current 5.66% mortgage rate. That was up 39% from last year’s $1,665 when mortgage rates were 2.87%, down from the June 12 peak of $2,467.