What does this mean for the market?
As the spring homebuying season kicks off amid heightened mortgage rates, a growing number of homeowners looking to sell are opting to lower their asking prices to attract buyers.
Recent data from Realtor.com shows that around 14.6% of homes listed for sale in the US last month saw a reduction in their listed price.
This marks an increase from 13.2% during the same period last year, indicating the first year-on-year rise in price reductions since May.
In January, homes with reduced prices accounted for 14.7% of the market, slightly above the average since January 2017.
“Sellers are cutting prices, but it just means we’re seeing smaller price gains than we would otherwise have seen,” Danielle Hale, chief economist at Realtor.com, said via the Associated Press.
The adjustment in listing prices seems to point towards normalizing the market conditions that have heavily favored sellers over the past few years. The pandemic era’s historically low mortgage rates spurred intense competition among buyers that inflated home prices. From 2019 to 2022, the median sale price for previously owned homes in the US surged by 42%.
Historically, the rate of listing price reductions peaked in October 2018 at 21.7%, with a similar peak in October 2022 at 21.5%. Meanwhile, the frequency of price reductions spiked to 18.9% in October of last year, as the average rate on a 30-year mortgage hit a 23-year high, according to Freddie Mac.
Hale said the recent fluctuations in mortgage rates have added pressure on sellers to adjust their pricing strategies to align with buyer expectations. But the pressure facing sellers could soon ease once rates start dropping as anticipated.
Recent economic indicators led to an uptick in mortgage rates for most of February. This came after a brief respite in December, when rates eased amid expectations of cooling inflation and potential rate cuts by the Federal Reserve
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