Home demand has remained strong so far despite rising mortgage rates, but a recent Redfin report suggests that some sellers are beginning to cut prices as more buyers are being pushed out of the market.
According to the report, 12 percent of homes on Redfin’s website had sellers cut prices in the week ending April 9. This was the biggest one-month spike in price cuts Redfin has seen since 2015.
Experts say that the seller cuts are not an indication that home prices will begin to fall dramatically, but instead may signal a “softening” in the market.
It also may signal that home price growth is starting to decelerate, meaning prices could begin to increase more moderately.
In the past four months, the average 30-year fixed mortgage rate has risen from around 3 percent to around 5 percent. For many homebuyers, this is a difference of hundreds of dollars extra per month when making mortgage payments.
According to Redfin, the typical new mortgage payment has jumped 35 percent year over year, for an all-time high of $2,288.
Here are some other key indicators from the report that point to a softening demand:
- Three percent fewer people searched “homes for sale” on Google than a year ago
- Touring activity so far this year is down 23 percentage points from the same period in 2021
- Mortgage purchase applications were down 6 percent from a year earlier
These indicators are what experts have been seeking for months, since many acknowledged the home prices were too high to be sustainable for much longer.
However, despite these predictions, it has taken much longer than many had initially expected.
The median home sale price is up 17 percent year over year, according to the report, for a record high of $389,178. Additionally, 54 percent of homes sold above list price during the period.
While rising mortgage rates have priced out many potential buyers, it also made some borrowers ineligible for a mortgage based on lender requirements.
Redfin Boston real estate agent James Gulden said that although every offer he’s written recently has had multiple offers, some people have finally had enough of the competition and are starting to pull out.
Despite these indicators, experts say issues with supply may keep a hold on a seller’s market.
In the meantime, financial experts say it’s wise for buyers to focus on getting themselves in the best financial shape possible, so when the right opportunity pops up, they can secure the best rate and terms for their personal situation.
While 5 percent mortgage rates seem like a lot in comparison to the record low rates seen during the pandemic, experts say these rates are still historically low.
Depending on the supply and demand in a buyer’s location of choice, they may have some luck in finding the perfect home despite the odds facing the rest of the nation, experts say.