The housing market is finally starting to cool, and home sellers are responding by cutting home prices.
According to Altos Research, more than 25% of homes on the market right now have cut their price.
The price cuts are in response to rising mortgage rates and other economic shifts that have made it increasingly difficult for the average house hunter to afford a home.
In mid-June, 30-year fixed mortgage rates had risen above 6%.
Mike Simonsen, co-founder and CEO of Altos Research, recently told MarketWatch that sellers will need to lower their prices by summer’s end, signaling a shift to more normal conditions.
However, he says there’s “nothing in the data” indicating that home prices will crash. There may be zero price appreciation in 2023, though.
Ken Shinoda, a portfolio manager at DoubleLine, agrees. He told Business Insider that the price drops are coming off the peak of a major rally, which is just normalization caused by higher rates.
Many real estate experts agree that the data isn’t showing a crash on the horizon, but more of a stabilization after such unique pandemic-led circumstances.
In some areas this summer, inventory will begin to increase while competition will decrease, creating more of an even playing field for buyers and sellers, experts say.
While some experts expect more neutral territory by the end of summer, others say it could take much longer — until 2024.
They say that while rising rates will price out “unnecessary buyers” from the market, it still will take time for prices to cool enough to make a difference, and it still will take time for inventory to get back to normal levels.
Mortgage experts are reminding borrowers that rates in the 2% to 3% range were historically low, and rates now in the 5% to 6% range are heading toward more normal averages.
Experts also say that while it’s helpful to be aware of national housing news, real estate is very much local.
The decision to buy a home depends more on the neighborhood a buyer is searching than what’s going on in the next city over.
Experts say the best way to begin the home search is to first get preapproved for a mortgage to determine how much the buyer can afford and what type of loan and rates are available to them.
The next step is to connect with an experienced local real estate agent who can help them find the right home within their budget.
Photo by Kindel Media