Home prices are showing signs of cooling, though they remain higher than a year ago. Several new reports indicate that price gains are shrinking, and home sellers are beginning to adjust after a stagnant spring market. For the first time since the onset of the Covid-19 pandemic, the typical house sold for slightly less than its asking price—0.3% lower—during the four weeks ending June 23, according to Redfin. A year ago, the typical home sold at list price, and two years ago, it was selling about 2% above list price.
This trend does not suggest a market crash. Nearly two-thirds of homes still sold over asking price in the past month, though this is the lowest share since June 2020. While most sellers continue to list homes at prices higher than comparable sales from a year ago, some are beginning to concede that these prices are not attainable. Mortgage rates remain persistently high, with the average rate on a 30-year fixed mortgage staying just above 7% for the third consecutive month, according to Mortgage News Daily.
The S&P Case-Shiller index reported a 6.3% increase in home prices in April compared to April 2023, with May continuing this trend. Home prices are now 47% higher than they were in early 2020, and the median sale price is five times the median household income.
An early look at data from ICE Mortgage Technology, to be released next week, shows that annual home price growth slipped to 4.6% in May from 5.3% in April, marking the slowest growth rate in seven months. This cooling in prices is attributed to an increase in supply. Total active listings are now 35% higher than they were a year ago, according to Realtor.com. However, even with this growth, inventory is still down more than 30% from typical pre-pandemic levels.
Marije Kruythoff, a Los Angeles Redfin agent, noted in a release that some buyers believe they can get a deal due to the perceived cooling market, while some sellers think every home will sell for top dollar regardless of its condition. In reality, the outcome depends heavily on the specific house and its location.
Overall, the housing market is experiencing a shift. While the high mortgage rates and increasing inventory are contributing to a slowdown in price growth, the market remains active, with many homes still selling above asking price. This nuanced landscape suggests that both buyers and sellers need to manage their expectations and consider local market conditions carefully.
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