Recent reports indicate a shift in the housing market dynamics, with home prices showing signs of cooling off. While prices are still higher compared to a year ago, the rate of growth is slowing down. According to Redfin, the typical house sold for slightly less than its asking price for the first time since the start of the Covid-19 pandemic. This marks a significant change from previous years where homes were selling at or above list price.
One of the factors contributing to the cooling housing market is the stubbornly high mortgage rates. With the average rate on a 30-year fixed mortgage hovering just above 7% for the third consecutive month, some sellers are finding it challenging to command higher prices for their homes. This has led to a decrease in the number of homes selling above asking price, signaling a shift in buyer-seller dynamics.
Data from ICE Mortgage Technology reveals that the annual home price growth rate slipped to 4.6% in May, down from 5.3% in April. This marks the slowest growth rate in seven months, indicating a trend towards moderation in the housing market. As supply starts to build up, prices are showing signs of stabilization after years of rapid growth.
Supply is a key factor influencing the cooling of home prices. Total active listings are now 35% higher than they were a year ago, providing more options for buyers in the market. Despite the recent increase in inventory levels, it’s essential to note that inventory is still down more than 30% from typical pre-pandemic levels. This imbalance between supply and demand is shaping the current state of the housing market.
Real estate agents are noticing a shift in buyer and seller perceptions in the market. Some buyers believe they can secure a better deal due to the perceived cooling of the market, while some sellers remain optimistic about selling their homes at top dollar. This disconnect in expectations is contributing to a more balanced market where negotiations play a crucial role in the home buying and selling process.
The cooling housing market presents opportunities and challenges for both buyers and sellers. As prices stabilize and inventory levels increase, the dynamics of the market are evolving. It’s essential for all parties involved to stay informed and adapt to the changing landscape of the real estate market.
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