A report released Thursday by Redfin showed that 6.4% of U.S. home sellers cut their asking prices during the four-week period ending May 26. That is the highest percentage since November 2022 and a potential sign that sale prices will soften in the coming months.
The national real estate brokerage reported that the median asking price in the past week was $416,623, a weekly decline of about $3,000 and the first pullback in six months.
Homes are also spending more time on the market. The typical number of days that a listing went unsold reached a median of 46 days in May, the first yearly increase in eight months. Combined with the decrease in asking prices, Redfin suggested that “sale prices could soften in the coming months as persistently high mortgage rates turn off homebuyers.“
Mortgage rates have declined in recent weeks. According to HousingWire’s Mortgage Rates Center, the average 30-year conventional fixed rate stood at 7.25% on Thursday, down from 7.30% one week ago. The 30-year conventional rate peaked this year at 7.58% on May 1.
Sale prices reached another record high, rising 4.3% year over year to $390,613. Redfin noted that “sale prices are a lagging indicator because they’re typically negotiated at least a month before a deal closes.“
Redfin’s data on price cuts dovetails with numbers released this week by Altos Research, which found that 34.8% of all homes currently on the market include a price cut. That share was up 40 basis points from the prior week and up 450 basis points year over year.
“By July, it is possible that more than 40% of the homes on the market will have price cuts. That would be a bearish indicator for future sales prices,“ Mike Simonsen, founder and president of Altos Research, wrote on Tuesday.
Redfin noted that the median monthly mortgage payment fell to $2,812 during the four weeks ending May 26 as rising sale prices were offset by declining interest rates. The median payment reached its lowest level in six weeks but was still 7.3% higher on an annualized basis. Payment amounts were based on an average mortgage rate of 6.94%.
Even as the monthly cost of owning a home is going down, purchase mortgage applications are still close to a six-month low point. Mortgage demand, measured by both purchase and refinance application volumes, dropped 5.7% year over year during the week ending May 24.
Christine Chang, a Redfin Premier agent in the San Francisco Bay Area, noted in the report that homes in her market that are good condition and listed for less than $1 million are still receiving multiple offers, even though sales activity is slower than usual.
“People who are buying right now are typically doing so because they’re having a baby or looking for a more family-friendly home,“ Chang said. “My advice for those buyers is to be open-minded: Consider single-family homes that are a bit outdated but don’t need major renovations, and/or homes in lesser-known, non-trendy neighborhoods.
“That type of home tends to sit on the market longer, and buyers may be able to avoid competition and get a home for asking price instead of engaging in a bidding war. Buyers who can get by with less space should consider a condo; they’re relatively unpopular right now and many are going under asking price.”
