- Sellers are being forced to drop home prices because of continued high mortgage rates and more days of sitting on the market. Realtor.com’s chief economist predicts this could “signal further price softening” during the spring homebuying season. Realtors and real estate experts across the U.S. have witnessed home price drops in their respective markets.
Spring homebuying season is officially here, and there’s some good news for those on the market to purchase a house. Sellers cut prices throughout last month as homes sat on the market for longer and mortgage rates remained stubbornly high.
The share of homes with price cuts was higher than in any February since 2016, reaching nearly 17%, according to Realtor.com, which predicts it could mean better deals for homebuyers this spring.
“This high share of price reductions could signal further price softening in the coming months as sellers adjust their expectations to market conditions,” Realtor.com chief economist Danielle Hale said in a statement.
Sellers have been forced to drop home prices while homes sit on the market for longer: 66 days on average, five days more than this time last year. There has also been little relief for homebuyers in terms of mortgage rates, which remain elevated at 6.74% as of Monday after dipping below 3% during the pandemic era. Experts noted, however, mortgage rates are trending down.
Inventory levels are also at their highest point since August 2019 while sales remained sluggish throughout January, Kenon Chen, executive vice president of strategy and growth at national real estate valuation tech company Clear Capital, told Fortune. He said, therefore, it’s not surprising to see sellers dropping prices.
But “should rates continue their downward trend over the next month, we could see more buyers come off the sidelines driving less need for price reductions as we head into the spring buying season,” he added.
More sellers are also took their homes off the market, with home delistings in December spiking 64% from a year ago to 73,000, according to CoreLogic data cited by the Wall Street Journal.
Spring homebuying season predictions
The current median sales price for a home in the U.S. is $412,000, according to Realtor.com, but the 15 fastest-growing states have much higher home prices. For example, the median home price in Massachusetts is more than $722,000, and a median-priced home in Washington State could set a buyer back nearly $600,000.
Still, realtors and housing experts across the U.S. have also taken notice of sellers cutting home prices because of the one-two punch of high mortgage rates and more days spent on the market.
Brett Johnson, a real estate investor and agent in Colorado, told Fortune he’s seen price reductions in the range of 3% to 5%, particularly in Denver and Boulder. Sellers who priced too high at the end of last year are “waking up to reality” and dropping prices to stay competitive, he said.
“Well-priced homes in desirable areas still move quickly, but anything sitting for too long gets discounted fast,” said Johnson, owner of Denver-based New Era Home Buyers. “Buyers are more cautious with higher mortgage rates, and affordability is driving the market more than ever.”
He said we’ll continue to see home-price reductions throughout the spring, but not an across-the-board price cut.
Evan Luchaco, a senior home loan specialist for Churchill Mortgage in Portland, Ore., said he’s seen home prices reduced by $5,000 to $10,000, but some homes that have been on the market for more than six months have dropped by as much as $150,000. But he anticipates a “more active” homebuying season, so price cuts may become less common if mortgage rates drop further.
“Motivated sellers—whether investors who must sell a property or homeowners relocating—will still make concessions. But well-prepared, competitively priced homes will still sell near asking,” Johnson said.
