More Sellers Dropping Asking Prices
May 31, 2022
Some homeowners may need to reset their price
expectations. Signs of a slowing real estate market are growing across the
country—existing-home sales and new-home sales are falling as well as pending home sales. Pending home sales fell for the sixth
consecutive month in April and are now at the slowest pace in nearly 10
years, the National Association of REALTORS® reported last week.
Homes are still selling fast but a slowdown is
evident in many markets. Amid rising mortgage rates that are pricing more
buyers out, some home sellers are having to revisit their asking price.
Price drops are particularly more common in
migration hotspots, places that have been relatively affordable but saw home
values surge as more people have migrated in from coastal areas since the
pandemic began, a new report from Redfin says. For example, in Boise, Idaho,
home prices are up 62% over the past two years. In April, 41% of home sellers
dropped their prices, the largest of 108 metro areas tracked by Redfin.
More than 20% of home sellers dropped their
price in April in seven of the 10 most popular migration destinations, the
report says. Other areas that are seeing a rise in price drops include Cape
Coral, Fla. (at 33% in April); New Orleans (32%); Baton Rouge, La (31%); and
Sacramento, Calif. (30%).
“Many places like Boise or Sacramento that saw
a surge in migration and a sharp increase in home prices over the past two
years have now seen an abrupt drop-off in demand, leading sellers to drop their
prices with increasing frequency,” says Daryl Fairweather, Redfin’s chief
economist. “When mortgage rates were at or below 3%, both local and out-of-town
home buyers were more willing and able to tolerate high prices, but at 5%, many
are priced out. A home’s price is driven by the balance of supply and demand,
and when demand drops off and supply increases like it is now, rapid price
increases evaporate quickly.”
NAR: Contract Signings Hit Slowest Pace in Nearly a Decade
Lawrence Yun, NAR’s chief economist, said in a recent release on
the latest housing data that higher mortgage rates have increased the cost of
purchasing a home by more than 25% compared to last year. In many cases, that
could mean the higher mortgage payments are leading up to $500 more per month
for borrowers. Further, higher home prices add another 15% to that figure, Yun
says. Also, households are facing rapid inflation that is increasing everyday
costs, like fuel and food.
Source:
“Home Sellers in Migration Hotspots Increasingly Turn to Price Drops,”
Redfin (May 27, 2022)
Comments
Post a Comment
Please feel free to leave a comment or question regarding this post or other relevant real estate topics. Thank you.