‘We see buyers pulling back’: Dramatic chart reveals housing market turnaround as sellers slash home prices

Here is a graph that says a lot about the current state of the real estate market.

The graph above, which is part of a new report from property brokerage Redfin RDFN,
in the real estate market, reveals how home sellers are adjusting to the new standard of 7% mortgage rates.

The chart shows that 7.9% of homes for sale on the market each week have seen their prices fall – and that’s a record.

That compares to just 4% of homes being priced weekly during the same period a year ago.

Redfin’s data dates back to 2015. The company averaged the share of listings that saw a price drop over four weeks, to smooth out outliers.

Taylor Marr, deputy chief economist at Redfin, added that over a longer period, i.e. a month, the firm’s data shows that a quarter of homes are currently falling in price.

“We’ve never been higher,” Marr told MarketWatch in an interview.

Unlike buyers, who are much more sensitive to rising mortgage rates, “sellers are just slow to respond to changes in demand…they price based on market conditions. [and] are often reluctant to set their prices too low,” Marr said.

So for sellers, prices are a bit more rigid, he added, and slower to come down.

But even though it took a long time, it is finally happening.

After all, mortgage rates have been at multi-decade highs, trending steadily above 7% over 30 years on Friday afternoon, according to Mortgage News Daily. And this is likely to rise even more, such as the TMUBMUSD10Y 10-Year Treasury Note,
tends above 4%.

Meanwhile, Redfin said the median home in the market was listed at over $367,000, up 7% from a year ago.

The monthly mortgage for this house at the current interest rate of 6.92%, according to Freddie Mac, is $2,559.

A year ago, when rates were 3.05%, that monthly payment would have been just $1,698.

Two tips for homebuyers struggling with high mortgage rates

Sellers are lowering their prices by an average of 4-5%, Marr said.

“You would almost expect it to be much worse,” he added, given how quickly rates have risen and eroded purchasing power.

But buyers and sellers are also using two different tactics to get some mortgage rate relief, Marr said.

First, sellers are reaching out to buyers and offering concessions to lower mortgage rates.

In other words, sellers ask buyers to pay the full asking price, but offer to use part of that amount as a concession to get buyers a lower interest rate on their mortgage.

“What’s essentially a price drop,” Marr said, “is the same thing…but it doesn’t necessarily show up in the data.” And it’s hard to get a sense of the scale of how this is unfolding, he added.

Here’s how it works, Marr explained: If a buyer puts down $100,000 for a 20% down payment on their home at a 6.5% interest rate, they can instead allocate 10% for the down payment and spend the rest of the $50,000 purchase. lower the mortgage rate to 5%.

“5% isn’t too bad, and it might seem like a lot of money, but… chances are you’ll be incentivized to refinance [in the future] and you’ll have to pay closing costs on that loan to refinance it, which could be over $15,000,” Marr added.

Buyers are also turning to variable rate mortgages, which offer lower interest rates at the start of the term. ARMs make up nearly 12% of all mortgage applications, the Mortgage Bankers Association noted Wednesday, which is high.

where the prices go down

As for where prices drop, a few places stood out from Redfin.

They said home prices fell 3% year over year in Oakland, Calif., and 2% in San Francisco. New Orleans also saw a 2% drop.

“Even in Atlanta or Orlando, we’re seeing buyers pull back,” Marr observed.

So, with the backdrop of sellers finally lowering listing prices, if you’re a buyer right now, don’t be scared off by rising rates and stop looking, he advised.

“There were opportunities when rates really came down and gave buyers time to come back and get some great deals on homes that have come down in price,” he said.

Plus, “it doesn’t hurt to make a low ball offer,” Marr added. “Some sellers are desperate, and that can be a good strategy…we’ve heard from some of our own agents that some buyers are getting amazing deals right now.”

But if you need to rent for a year and wait for things to calm down, do it, Marr said, and boost those savings for that dream home.

Do you have ideas on the housing market? Write to MarketWatch reporter Aarthi Swaminathan at aarthi@marketwatch.com


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