Homes Are Now Selling for Less Than the List Price

Redfin reported last week that the single-family home market still has room to ease, though the “cooldown appears to be tapering and the number of homes with a price drop fell from its record high.

More indicative is that the average home sold for less than its list price for the first time since March 2021 and mortgage purchase applications and pending sales both had large year-over-year declines, Redfin said.

July’s new listings and the total inventory of homes also plummeted.

Mortgage rates were elevated at last week’s end at 5.66%, their highest level since June and up from 3.22% at the start of the year.

‘Highly Unusual’ for All Homes to Sell at Asking Price

Scott Harris, a top producing agent with Brown Harris Stevens, tells GlobeSt.com that for a market to reach a point where every house sells at its asking price “is highly unusual.

“Just like the law of gravity, what goes up must come down; I am neither surprised nor concerned about this development. Buyers will be encouraged, and sellers will just have to temper their expectations slightly.

“Houses will take slightly longer to sell, and the market will find a healthy balance between buyers and sellers.”

That said, sellers have had the upper hand in most markets for at least 18 to 24 months, Harris said. “That’s a pretty good run within a real estate cycle,” he said.

The Average Homebuyer is ‘Priced Out’

Michael J. Romer, managing partner of NYC real estate law firm Romer Debbas, tells GlobeSt.com, “Overly aggressive interest rate hikes have had a direct negative impact on prospective homebuyers. Despite limited inventory in many areas across the country, every buyer has a breaking point and consumed demand has certainly chilled. This has resulted in price reductions in many markets.

“When the dollar in one’s pocket is worth 8% to 9% less than it was a year ago and mortgage rates have effectively doubled, of course, the average homebuyer will be priced out and eventually hit the pause button.”

Expect Homes to Linger on the Market

Redfin chief economist Daryl Fairweather said in prepared remarks, “The post-Labor Day slowdown will likely be a little more intense this year than in previous years when the market was super tight.

“Expect homes to linger on the market, which may lead to another small uptick in the share of sellers lowering their prices.

He said that homebuyers’ budgets are increasingly stretched thin by rising rates and ongoing inflation, so sellers need to make their homes and their prices attractive to get buyers’ attention during this busy time of year.