Several new reports from real estate companies suggest buyers may be starting to get a break in this red-hot housing market. More listings are coming up for sale, and some sellers are lowering their asking prices.
The number of new listings last week jumped 8% from a year ago, according to Realtor.com. This follows four straight weeks of annual declines in new listings. The total amount of active inventory for sale is still down 13% from a year ago, but it may be on track, given the rise in new listings, to surpass year-ago levels by this summer. New listings tend to peak in May.
Prices, however, are still well above year-ago levels. Higher mortgage rates are also making houses less affordable. The average borrower is now paying about 38% more than they would have for the same home a year ago on a monthly payment.
“For some buyers, general inflation and related mortgage rate hikes mean less budget flexibility to pursue freshly-listed homes. For those who can afford to persist, a silver lining could be relatively less competition for more for sale home options, which could lead to some relief from relentless home price momentum.
As more supply comes on the market, and mortgage rates rise sharply, sellers appear to be coming back to earth, at least a little. About 12% of homes for sale had a price drop during the four weeks ending April 3. That’s up from 9% a year ago, according to Redfin. The rate of sellers dropping their asking prices is now growing faster each month than it has since last August.
“Price drops are still rare, but the fact that they are becoming more frequent is one clear sign that the housing market is cooling,” said Daryl Fairweather, Redfin’s chief economist. “It goes to show that there’s a limit to sellers’ power. There is still way more demand than supply, and buyers are still sweating, but sellers can no longer overprice their home and still expect buyers to clamor at their door.”
Buyers are sweating because the average rate on the 30-year fixed mortgage, which has been rising since January, really took off in the past few weeks. It surpassed 5% earlier this week, according to Mortgage News Daily. Consumers are more pessimistic about the housing market, according to a monthly survey from Fannie Mae, and especially about mortgage rates.
The share of consumers who expect mortgage rates to rise further increased to 69% from 67% in March. More consumers also said they believe home prices will continue to rise.
“If consumer pessimism toward homebuying conditions continues, and the recent mortgage rate increases are sustained, then we expect to see an even greater cooling of the housing market than previously forecast,” wrote Mark Palim, vice president and deputy chief economist at Fannie Mae.