Home Sellers Are Starting to Drop Their Asking Price

Twelve percent of homes for sale had a price drop during the four weeks ending April 3, up from 9% a year earlier and the highest share since early December. The rate of sellers dropping their prices is growing faster month over month than it has since August.

This fast-growing share of home-sellers dropping their prices is another sign that the early 2022 housing frenzy is starting to ease as mortgage rates approach 5%, according to a new report from real estate brokerage Redfin.

Price drops are still rare, but the fact that they are becoming more frequent is one clear sign that the housing market is cooling, according to Redfin chief economist Daryl Fairweather. 

“It goes to show that there’s a limit to sellers’ power,” Fairweather said in prepared remarks, “There is still way more demand than supply, and buyers are still sweating, but sellers can no longer overprice their home and still expect buyers to clamor at their door. That’s because higher mortgage rates are eating into homebuyers’ budgets.”

The monthly mortgage payment on the median asking price home rose to a record high of $2,245 at the current 4.72% mortgage rate, Redfin noted. This was up 32% from a year earlier, when mortgage rates were 3.13%.

Fairweather advised buyers to be wary of bidding significantly over asking on newly listed homes, and to take a closer look at the homes that have been on the market for more than a week.

Expensive Coastal Markets Softening

Other early indicators signal that homebuyer demand is continuing to soften, especially in expensive coastal markets. Year-to-date growth in home tours measured by ShowingTime fell 3% compared to last year, when Easter briefly interrupted home buying activities. 

Mortgage purchase applications fell 9% from last year and were down 3% from the prior week. Redfin’s seasonally adjusted homebuyer demand index, which measures requests for home tours and other service from Redfin agents, has been flat for the past month, further evidence that homebuyers’ pocketbooks are not a bottomless well.

The timing of this trend, namely the spring season, is also telling. Usually April is when the market starts to heat up, according to Seattle-area Redfin real estate agent Dee Heyerdahl. “Listings that a month ago would have had a dozen interested buyers touring in a single day now see less action than that in a whole week,” she said.