With the average 30-year fixed mortgage rate climbing to 6.23% on Thursday (more than doubling from 3.1% at the beginning of the year), the housing market is finally beginning to cool. Homes sat on the market last month for an average of five days longer than they did a year ago. And for the first time since August 28, 2021, the average home sold for less than its listed price.
“There are fewer bidding wars. Maybe the seller gets the asking price, but they don’t get eight bids that push it over the asking price,” notes Andrew Sachs, a Keller Williams broker in Newtown, Connecticut, who says he is seeing signs that the market is beginning to slow. “A seller can’t ask for the world and get it [anymore], so everything is going to be more negotiable.”
In August, the median listing price for a home dropped from $449,000 to $435,000, as one in five sellers were forced to lower their asking price, according to Realtor.com.
“For many of today’s buyers, the uptick in for-sale home options is taking away the sense of urgency that they felt during the past two years, when inventory was scarce,” said Danielle Hale, chief economist at Realtor.com.
“As a result of this shift, coupled with higher mortgage rates, competition continued to cool in August, with listing price trends indicating that home shoppers are tightening their purse strings," adds Hale.
High interest rates coupled with an increase in the supply of homes are finally slowing a housing boom that began during the COVID-19 pandemic, when folks were running from their apartments in the cities to houses in the suburbs as a way to better socially distance themselves.
Household incomes were also boosted during the pandemic by stimulus checks and extended unemployment benefits. That, in addition to low mortgage interest rates, raised the demand for homes, with prices hitting an increase of 19.3% by July of 2021, and then rising further by 14.3% this July.
The supply of homes is also increasing, though builders still aren’t not able to work fast enough to match the growing demand, as they still look back at the Great Recession with wary eyes.
“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 Daryl Fairweather, Redfin’s chief economist. “Expect homes to linger on the market, which may lead to another small uptick in the share of sellers lowering their prices.”