Key Takeaways
- One in four sellers decreased the price of their home to entice buyers, a new Zillow report said.
- Home listings have increased as some sellers who were waiting for lower rates give up as high interest rates persist.
- Buyers remain on the fence even as mortgage rates start to wane and more homes come to the market.
Sellers may have held an upper hand in the U.S. housing market for the past few years, but that could be changing.
One in four sellers decreased the price of their home to entice buyers in June, according to a new report from Zillow. With home prices near record highs, buyers have been less willing to cave to higher prices. As a result, pending home sales reached a record low last month.
Now that more houses are coming onto the market, sellers are facing increasing competition and are being forced to lower asking prices.
The Seller’s Dilemma
Over the past two years, the Federal Reserve has raised its benchmark interest rate to 23-year highs to combat inflation. That has made borrowing—including mortgages—more expensive. In addition, sellers have become reluctant to trade their low mortgage rates for higher ones, opting to stay put until they recede.
As fewer homes came on the market, scarcity drove up home prices. Median existing home prices jumped 5.8% year-over-year in May to a record $419,300, according to data from the National Association of Realtors.
Many homeowners waiting for mortgage rates to drop before listing their homes have changed their minds as the Fed has not begun cutting rates yet, implying mortgage rates may not come down significantly any time soon.
Listings jumped 4% from May to June, according to Zillow, and are 23% higher compared to the lows of last year. However, home inventories are still about 33% lower than before the pandemic.
Tide May Be Turning For Homebuyers
However, mortgage rates are finally showing signs of moderating. The average payment is still higher than pre-pandemic but today a 30-year mortgage has a rate of 6.89%, the lowest since March, according to Freddie Mac.
Homebuyers are finding themselves in a better position now as mortgage rates are waning and more homes are getting listed. Compared to the spring, homebuyers with a $3,000 monthly budget gained over $20,000 in purchasing power, according to a report from Redfin.
