The average American home is now selling below its asking price for the first time since March 2021, according to data from online brokerage Redfin.
According to Redfin, the average sale-to-list price ratio fell to 99.8 percent in the four-week period ended Aug. 28—the first time it was below 100 percent in almost 18 months.
The number of listings showing a price drop remained the same from the prior four-week period at 7.5 percent.
The median home sale price was $370,000, up 6 percent year over year, according to the report.
Redfin said that some home prices have fallen 6 percent from the record high of $393,725 that hit during the four-week period ending June 19.
From 2020 to 2022, a pandemic-induced housing boom led to intense bidding wars between homebuyers, causing housing prices to skyrocket, as people bought up the limited supply of available homes, which partially led to the current shortages.
Since March, the Federal Reserve has been attempting to curb 40-year high inflation by raising benchmark interest rates, leading to a jump in mortgage rates and an end to the housing boom.
It is widely expected that Fed will push for further rate hikes after its policy meeting in September.
The rise in mortgage rates over the past several months have made housing less affordable, pushing many first-time buyers out of the market, while forcing sellers to lower their prices.
As a result, many homeowners have seen a decline in the value of their homes as the U.S. housing market slumped, causing a decline in their wealth, according to a July report (pdf) from mortgage analytics firm Black Knight.
Sales of new homes in July slid to their slowest rate since early 2016 as buyer demand imploded, while the supply of homes grew as available inventory recovered due to low sales.
Predictions For Fall Home Market
“The post-Labor Day slowdown will likely be a little more intense this year than in previous years when the market was super tight,” said Redfin’s chief economist Daryl Fairweather in a statement.
“While the cooldown appears to be tapering off, there are signs that there is more room for the market to ease,” he said.
The drop in home values has continues to deter many sellers from entering into the market, slowing down the growth in new listings, despite the boost in total inventory.
The buyers market also remains weak despite softening home prices.
The level of mortgage purchase applications and pending sales still are far below what they were only a year ago during the boom.
Mortgage purchase applications were down 2 percent week over week, a drop of 23 percent from a year earlier during the week ending Aug. 26.
As mortgage rates shoot back up to their June record high, when fixed rates for 30-year loans briefly surpassed 6 percent, the fall sales season is expected to see a further decline in the housing market.
The average rate for a 30-year fixed-rate mortgage increased to 5.66 percent for the week ending Sept. 1, according to Freddie Mac’s Primary Mortgage Market Survey.
Rates jumped from the week prior, when it was still at 5.55 percent, and is almost twice the amount last year when it was 2.87 percent.
Meanwhile, the share of listings featuring reduced prices finally began to plateau in August, with signs that the housing market is beginning to level out for the time being.
“Expect homes to linger on the market, which may lead to another small uptick in the share of sellers lowering their prices,” Fairweather said.
“Homebuyers’ budgets are increasingly stretched thin by rising rates and ongoing inflation, so sellers need to make their homes and their prices attractive to get buyers’ attention during this busy time of year.”
However, some like Mortgage Bankers Association’s senior vice president and chief economist Mike Fratantoni are optimistic about the market in the long run and expects an eventual market recovery.
“There is no sign of a rebound in purchase applications yet, but the robust job market and an increase in housing inventories should lead to an eventual increase in purchase activity,” he said.