Redfin, a real estate brokerage, released a collection of statistics today that illustrate some of the positive effects of the current cooling housing market. After nearly two years of a highly competitive market, once rejected buyers finally have another chance to purchase that home they always wanted, even with higher mortgage rates making it slightly more expensive to buy. The slower market also means house hunters can start to include contingencies again, like appraisals and inspections in their offers.
Other indicators that showcase the bright side to this cooling market include:
In July 2022, 53 Austin, Texas homes sold for at least $100,000 above their asking price, equal to about 2% of all homes sold during the month. That’s down from 163 (4.7% of all homes sold) a month earlier and 362 (9.1%) a year earlier near the height of the pandemic homebuying frenzy.
That’s a prime example of the slowing housing market giving buyers a break after nearly two years of an ultra-competitive environment. The average 30-year fixed mortgage rate has nearly doubled from a year ago, reaching 5.66% during the week ending September 1. Though higher mortgage rates are making it even more expensive to buy a home after two years of skyrocketing prices, the silver lining is that they have thrown some water on the red-hot market.
“Ultimately, the news that home prices are finally starting to come down while bidding wars are becoming less common is more good than not,” said Jacob Channel, senior economist for LendingTree, an online lending marketplace. “While some current homeowners may be disappointed to learn that they cannot immediately sell their home for above their initial asking price as easily as they could over the last two years, the reality is that the housing market has grown much too expensive for a large number of home buyers. This is especially true given how much mortgage rates have risen this year.”
“With that said, while this latest news will likely be met with open arms from home buyers, prices still remain steep, as do rates,” said Channel. “It’s also worth noting that though prices are cooling, there still isn’t much reason to expect the housing market as a whole to crash or otherwise majorly slump. As a result, while home buyers may have a somewhat easier time purchasing a home over the coming months, those who are expecting prices to plummet should probably readjust their expectations.”
Redfin also compiled some of its most recent housing-market stats illustrating the bright side of the cooling market for buyers.
Homes are still 5.9% more expensive than they were a year ago, but that’s the slowest growth rate since the start of the pandemic. And there are ways around high mortgage rates: Buyers can take out an adjustable-rate mortgage, which tend to have lower upfront rates, or they can refinance in the future.
“Sellers are losing some of their leverage, which is helping buyers, who have been through the wringer over the last two years,” said Raleigh, North Carolina Redfin agent Jordan Hammond. “Buyers are excited that homes are staying on the market longer and that some sellers are even dropping their prices. I’m reminding buyers that relatively high mortgage rates shouldn’t stop them if they’re serious about finding a new home, as they’re still historically low.”
The slower market also means house hunters can include contingencies such as appraisals and inspections in their offers.
“Today’s buyers are negotiating, and they expect sellers to work with them,” said Redfin agent Angelica Webb. “If a buyer offers $35,000 below asking price and the seller counters with a $10,000 reduction, the buyer may walk away from the deal. If they ask for a repair after the inspection and the seller refuses, they may walk away.
“Three months ago, a buyer would have been very unlikely to make an offer under asking price or back out after an inspection. But now that there are more homes for sale and fewer buyers, they can just look at similar properties with recent price reductions or make an offer to a seller who is willing to negotiate.”