As housing market cools, homebuyers regain leverage
LOS ANGELES (AP) — Years of soaring home prices and sharply higher mortgage rates remain hurdles for many would-be homebuyers, but new data shows that they’re regaining some leverage at the negotiating table as the housing market slows.
An analysis of home sales data by Redfin shows that, on average, U.S. homes purchased during a four-week period in August sold for less than what sellers were asking. That hasn’t happened since at least March 2021, according to the real estate brokerage.
“The only times you get homes going above list price is when there’s a bidding war, and those used to not be a regular occurrence,” said Daryl Fairweather, Redfin’s chief economist. “And we’re back to a place where bidding wars are unusual, not the norm.”
The average sale-to-list price ratio, a measure of how closely homes are selling to their asking prices, fell to 99.8% in the four weeks that ended August 28, Redfin said. The ratio was 101.4% in the same stretch last year. Ratios above 100% indicate homes on average are selling at or above their asking price.
For most of last year and this year, fierce competition for relatively few homes on the market and rock-bottom interest rates fueled bidding wars that often led homes to sell for well above their list price.
That remained the prevailing trend until recently, even though the housing market has cooled significantly since the spring as mortgage rates surged sharply above where they were last year. Higher mortgage rates make homes less affordable, thinning out the pool of home hunters, which leaves sellers with less leverage when negotiating with buyers.
On average, 7.5% of homes for sale in the four weeks in August that Redfin tracked had a price drop each week, a record high, the company said.
That the typical home is now selling for below the asking price is a sign that the housing market is becoming a bit more balanced, or less skewed, toward sellers.
“It’s significant that now buyers know that when they’re bidding on a home chances are they can get it for less than the asking price and without a competing offer, which was not the case earlier this year,” Fairweather said.
That doesn’t mean some homes aren’t still drawing multiple offers. Some 37% of homes purchased in the four-week stretch of August analyzed by Redfin sold for more than their list price. That was down from 50% a year earlier, Redfin said.
And buyers must still contend with rising home prices, albeit not as sharply as before. The national median home price jumped 10.8% in July from a year earlier to $403,800, according to the National Association of Realtors.