As Sellers Lower Home Prices, Conversations 'More Emotional'

Redfin reported late last week that the sudden surge in mortgage rates has reduced homebuyers’ budgets in many markets, forcing sellers to reset their price expectations.

Such has been the case in red-hot markets like Phoenix, where area real estate agent Amy Gloyd, Realtor, at Jason Mitchell Real Estate, works. She tells GlobeSt that when she was pricing homes to sell in the past two years, she would list them for top dollar.

“Because of the supply shortage, we were very confident that our sellers would get what they were asking and possibly more,” Gloyd said.

“Now that the market has shifted, pricing has to be realistic, and conversations with sellers need to take place regarding a suggested price reduction after week one if there are no offers.”

The shift has been fast, and it has been hard for sellers to come to terms with it, Gloyd said, “but this is the new reality. 

“On the flip side, buyers now have the opportunity to negotiate with sellers for a win/win situation. The playing field is evening out. I’m telling potential buyers to buy now.”

She said that interest rates will likely continue to increase, “and right now you’re able to get a home without competing against multiple offers. In regards to waiting for housing prices to drop as a whole in the Phoenix metro area, that is not what is happening. This shift has stopped the rapid increase of home prices.”

The New Mortgage Rate Climate

Marcus & Millichap said the drop in home sales reflects a new mortgage rate climate.

“Home buying has cooled off significantly, with the overall sales volume shrinking by 15 percent between January and April 2022, directly correlated to the recent mortgage rate surge,” the firm said.

“Higher borrowing costs are weighing on buying activity, supporting an increase in available inventory. From July 2021 through February of this year, when financing was extremely favorable, the number of homes ready for purchase steadily declined.”

Now in April, the firm said, the for-sale count of existing homes rose for the second straight month. 

Marcus & Millichap reported that inventory is still low by historical measures, and it requires 650,000 more homes to match 2019’s level. 

“The historically small for-sale pipeline is sustaining the swift price growth trajectory, even as buying activity wanes,” it said.

Home-Selling ‘More Emotional’ Now

Redfin real estate agent Shauna Pendleton, from another top market, Boise, said in prepared remarks, “Conversations with prospective sellers are longer and more emotional now than they were just a few months ago. If your home has been listed for several days with little or no interest from buyers, it’s time to consider dropping the price.”

Price drops are becoming increasingly common, particularly in hot migration destinations, according to Redfin. In Boise, where home prices are up 62% in the past two years, 41% of home-sellers dropped their price in April, the largest share among the 108 metropolitan divisions included in Redfin’s analysis.

Cape Coral, Fla., (33%), New Orleans (32%), Baton Rouge, La. (31%) and Sacramento (30%) filled out the five markets that are driving the national rate of price drops to its highest level since October 2019.