LOS ANGELES — The housing market’s comedown from the high-flying days early this year is deepening, with July home sales falling for the sixth straight month.
Sharply higher mortgage rates, rising inflation and prices that remain close to record highs are making homes less affordable. Sales fell 20.2% from July last year, reaching their lowest pace since May 2020, towards the start of the pandemic.
But with the slowdown, the comparison of buying a home is beginning to tilt, albeit slightly, in favor of home hunters who can afford to stay on the market and away from sellers, who were previously able to sell their homes. at prices they may never have dreamed of.
Houses are still selling very quickly on average and many continue to make multiple offers. But many sellers have had to become more flexible about their asking price and find that they can no longer require potential buyers to waive key safeguards such as a home inspection before closing the deal.
The shift doesn’t mean it’s now a buyer’s market — it will take a surge in the number of homes on the market for that to happen. Yet it is a remarkable turnaround after a housing shortage, floor mortgage rates and rising house prices have sharply skewed the housing market in favor of sellers in recent years.
“We know that homes take longer to sell, sellers have to price more carefully and adjust if they’re not competitively priced,” said Danielle Hale, chief economist at Realtor.com. “So it’s going in a buyer-friendly direction, but I’m not sure it’s there yet.”
New data shows a somewhat mixed picture of the housing market, with sales continuing to fall, while tight stocks of homes for sale are pushing prices up.
The National Association of Realtors said on Thursday that sales of existing homes fell 5.9% from June to a seasonally adjusted annual rate of 4.81 million. Excluding the slowdown from the pandemic, sales in July were at their slowest pace since November 2015, NAR said. The last six-month losing streak occurred between August 2013 and January 2014.
Despite the softer market, many sellers are still busy with various offers. A typical home received 2.8 offers last month, although that’s less than 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 eventually accepted a $645,000 offer, but it fell apart shortly after. The couple, now living in Portland, Maine, relisted the house a few weeks later, but eventually accepted an offer of $615,000.
“We started out super optimistic. We got a ton of offers over asking and a month later it was clearly a few offers and a lot less,” said Brooks, a systems analyst. “We definitely thought that if we left it on the market, the offers would keep getting lower.”
Despite the housing market losing momentum, house prices have continued to rise sharply. The national median home price rose 10.8% in July from a year earlier to $403,800. But earlier in the year, prices rose by about 20% annually.
Before the pandemic, the median home price was rising about 5% a year, said Lawrence Yun, NAR’s chief economist.
“So, it’s still rising pretty strong, even if it’s moderating from a superheated pace,” he said.
At the start of the year, when the real estate market was still red hot, competition fueled bidding wars that often resulted in homes selling within days of the sale and for well above their selling price. As the market has cooled, the difference between the price at which homes are listed and what they ultimately fetch has narrowed nationwide.
In January, the median US home sales price was 14.4% below the median sales price, but by May the difference had risen to 19.5%, according to an analysis by Realtor.com. Even in a scorching hot market, on a national basis, homes typically sell below asking price.
Data suggests that some metropolitan areas where homes sold on average above asking price have completely flipped and are no longer seller’s markets, as buyers have been given more leverage to negotiate a more favorable price.
For example, in the Memphis metropolitan area, the median home sales price in January was 11.1% higher than the median sales price. That turned around in May, with the median selling price 11.4% lower than the median selling price, according to Realtor.com.
The trend is not limited to a particular region. Among those locations that are less favorable to sellers are metro areas around Honolulu, Miami, Detroit, Milwaukee and Little Rock, Arkansas.
Another sign that the market has become more favorable to buyers: an increase in the share of properties whose price has been reduced. In January, before mortgage rates began to rise sharply, the asking price of just 6.4% of US homes for sale was cut, according to Realtor.com. This increased steadily during the year and reached 19.1% in July.
“Sellers need to lower their price to more realistic terms or a little below where they want it,” said Jessie Rittenhouse, an agent at Century 21 in the Dallas-Fort Worth metro area.
In addition, sellers sometimes offer to pay buyers’ closing costs or give them thousands of dollars to offset the impact of higher mortgage rates, Rittenhouse said.
Still, competition for the most affordable housing remains tense, even as demand has generally cooled.
An analysis of home sales by Zillow shows that sellers whose homes are priced in the lowest third of the market are less likely to lower their asking price than sellers of homes in the mid-range and higher segments of the market.
That applies in the most expensive markets, such as Los Angeles, New York and Seattle, as well as in more affordable markets such as Atlanta, Kansas City and Tampa, the found real estate data company.
For new buyers and others looking at homes at the lower end of the price spectrum, that means their prospects of owning a home aren’t necessarily improving.
“Affordability has fallen to its lowest level in 30 years,” said NAR’s Yun. “That’s why home sales are falling.”
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