Home Sellers Start Dropping Asking Prices

The typical April holiday slump in buying and selling homes during the Easter and Passover weekends could stretch to Memorial Day and beyond, according to a new report from real estate brokerage firm Redfin.

What was already a slowdown triggered by surging mortgage rates and housing costs, that mid-April lull was amplified as approximately one in eight sellers cut their list prices during the four weeks ending April 17—the highest share in five months.

Asking prices declined slightly from the previous four-week period as well. 

“Home sellers are beginning to realize that the initial – and dramatic – increase in home prices may have been premature, Steven Ostad, founder and principal, Real Quick Capital, tells GlobeSt.com.

“Now, with the increase in interest rates dominating headlines, the general sentiment is starting to trickle down to agents who in turn tell their sellers to drop the price,” Ostad said.

“This shows a clear change of tone, as agents are clearly advising sellers to be more reasonable. As to how this affects the market, confidence has clearly dropped in the past six weeks, but will most likely stabilize the market from the rapid growth in home values over the past few years.”

Redfin’s Homebuyer Demand Index—a measure of requests for home tours and other home-buying services from Redfin agents—fell 4% year over year during the holiday week in its first drop since June. Also falling were mortgage applications and online searches for “homes for sale.”

New Highs Set for Demand, Too

These recently unprecedented conditions have home prices hitting historic highs and mortgage rates jumping past 5% for the first time since 2010.

The median home-sale price is up 17% year over year to a record $392,750, Redfin reported. The typical homebuyer’s monthly payment went up 38% to an all-time high of $2,318 and meanwhile, the homes selling above list price and those selling within one week continue to set records.

Redfin chief economist Daryl Fairweather said in prepared remarks that the lull in home buying seen in mid-April over Easter and Passover is likely to continue well past those holiday weekends.

“The forces causing many homebuyers to pump the brakes are still in place—increasing mortgage rates and record-high home prices,” Fairweather said.

“We expect price increases to slow and buyers in bidding wars to face fewer competing offers, but substantial relief for homebuyers is unfortunately still well beyond the horizon since the housing market is still tilted further in sellers’ favor than at any time in history.”