Home prices in the housing market are starting to cool off, although they are still higher than they were a year ago. Recent reports indicate that price gains are shrinking and sellers are beginning to lower their prices after a stagnant spring market. According to real estate brokerage Redfin, for the first time since the start of the Covid-19 pandemic, homes sold for slightly less than their asking price, about 0.3% lower, during the four weeks ended June 23. In comparison, a year ago, homes were selling at list price, and two years ago, they were selling at about 2% above list price.
While this may sound like bad news for sellers, it doesn’t mean that the housing market is crashing. In fact, a little less than two-thirds of homes still sold over asking price in the last month. However, this is the lowest share since June 2020. Although most sellers are still listing their homes at higher prices than comparable homes sold for a year ago, some are realizing that they can no longer command those prices.
One factor contributing to the cooling in prices is the increase in supply. Total active listings are now 35% higher than they were at this time last year, according to Realtor.com. However, it’s important to note that even with this recent growth, inventory is still down more than 30% from typical pre-pandemic levels.
The slowing growth in home prices can also be seen in the S&P Case-Shiller index. In April, home prices were up 6.3% from April 2023, and this trend continued in May. Home prices are now 47% higher than they were in early 2020, with the median sale price now five times the median household income. However, CNBC obtained an exclusive early look at home price data from another index by ICE Mortgage Technology, which showed that annual home price growth slipped to 4.6% in May from 5.3% in April. This is the slowest growth rate in seven months.
One possible reason for the cooling housing market is the stubbornly high mortgage rates. According to Mortgage News Daily, the average rate on the 30-year fixed mortgage has remained just above 7% for the third straight month. These high rates could be deterring potential buyers and impacting the demand for homes.
Overall, while the housing market is still strong, there are signs of a slowdown in price gains. Increased supply and high mortgage rates are contributing to this cooling trend. It’s important for both buyers and sellers to be aware of these changes and adjust their expectations accordingly. As Marije Kruythoff, a Redfin agent, mentioned, everything depends on the specific house and location when it comes to pricing and selling in this evolving market.
