Sellers are lowering prices at a record level!
Rising interest rates are putting pressure on homebuyers and leading more sellers to lower their prices. Around 20.8% of home listings saw price drops in October, the highest percentage recorded. This trend is driven not only by rates but also by sellers aiming too high, influenced by past successful sales.
Buyers now face interest rates of 7.5% to 8%, shrinking their purchasing power. Despite more sellers reducing prices, median sales prices are still up 3% from last year. This situation is impacting various sectors within the industry.
Builders are offering incentives, including mortgage-rate buydowns, to close deals, but these might pose challenges if rates suddenly drop. Higher rates are also affecting construction, with fewer single-family homes under construction compared to last year.
The affordability crisis is boosting demand for rental properties, especially among younger buyers who find homeownership out of reach. Mortgage applications have decreased by an average of 22% nationally due to these high rates.
Certain cities like Cincinnati, Indianapolis, and Denver saw a significant number of homes with price drops in October. Pending home sales dropped almost everywhere except in Austin, Tampa, and Las Vegas.
While the national median sales price has increased by 3.4% compared to last year, some markets like West Palm Beach, Austin, and Fort Worth have experienced declines. On the other hand, cities like Newark, San Jose, and Columbus have seen double-digit increases.
Redfin anticipates a potential slowdown in the growth of sale prices in the coming months, reflecting contracts made when rates reached 8% in October.