A significant number of sellers in the US are cutting prices as high mortgage rates and fears of a possible recession keep many potential buyers at bay.
A recent report by Redfin shows that over 25% of home sellers in three-quarters of the metros tracked nationwide by the brokerage firm reduced their asking prices in June.
In some areas, more than 60% of sellers cut their prices, which the report says “has become a common feature of the cold-storage housing market, particularly in locations that were popular with homebuyers early in the pandemic.”
Thirty-year mortgage rates are a lot higher than they were at the start of the year, which “has really cost homebuyers budgets,” Redfin chief economist Daryl Fairweather told FOX Business.
Rates on 30-year fixed-rate mortgages averaged 5.54% this week, up from 5.51% a week ago, according to mortgage buyer Freddie Mac.
Mortgage rates jump as home affordability falls
Some homebuyers have had to exit the buying market entirely and face the rental market, while others are still in the game but “much less willing to bid above asking price or maintain homes that are overpriced,” Fairweather added.
As buyers are more “nervous”, sellers make concessions and lower prices. Fairweather said sellers no longer have the luxury of choosing between dozens of listings like they would have earlier this year.
According to the analysis, Boise, Idaho had the highest proportion of buyers who lowered their asking price at 61.5%. That’s up from 25.7% in June 2021.
Denver, Colorado, and Salt Lake City, Utah, weren’t far behind, with 55.1% and 51.6%, respectively, of sellers cutting their prices, according to the report.
Almost half of the sellers in Tacoma, Washington; Grand Rapids, Michigan and Sacramento, California also lowered their rates.
Boise, Salt Lake City, Sacramento and Tampa were popular hotspots between the summer of 2020 and March 2022, “as homebuyers moved in from expensive coastal job centers and benefited from low mortgage rates and remote work,” according to Redfin.
UNDERPRODUCTION CRISIS IN US HOUSING MARKET GETTING HEAVY, FIND NEW ANALYSIS
However, her popularity worked against her.
“Their popularity led to fierce competition for a limited supply of homes for sale, driving up prices and making them unaffordable for many buyers,” the report continued.
For example, according to the report, a typical home in Boise sold for $550,000 in May, up 60% from two years ago. Similarly, prices for the typical Sacramento home rose 44% to $610,000.
“Consumer sentiment is also making homebuyers reluctant to break their budgets,” Fairweather added.
According to Fairweather, homebuyers are concerned not only about inflation rising further, but also about what would happen if the economy slips into recession and the unemployment rate rises.
|RDFN||REDFIN CORP.||9.30 a.m||-0.51||-5.20%|
|RLGY||n / A||n / A||n / A||n / A|
|ZG||ZILLOW GROUP INC.||36.45||-1.22||-3.24%|
CLICK HERE TO READ MORE ABOUT FOX BUSINESS
“Homebuyers don’t want to get into a situation where they can’t afford their mortgage because they don’t have the income they thought they would have,” Fairweather added.
Here are the top ten metropolitan areas that had the largest percentage of sellersRing their prices in June:
- Boise, Idaho: 61.5%
- Denver, Colorado: 55.1%
- Salt Lake City, Utah: 51.6%
- Tacoma, Wash.: 49.5%
- Grand Rapids, Michigan: 49.3%
- Sacramento, California: 48.7%
- Seattle, Washington: 46.3%
- Portland, Oregon: 45.7%
- Tampa, FL: 44.5%
- Indianapolis, Indiana: 44.1%