Home prices are falling at the fastest pace in over a year, thanks to demand plunging amid stubbornly high mortgage rates, according to Redfin.
Across the US, 6.4% of sellers issued a price cut in the month leading up to May 26, the real estate listing site said in a recent report. That’s the highest percentage of sellers that have slashed prices since November 2022, when the 30-year fixed mortgage rate spiked past 7% for the first time in more than 20 years.
Price cuts have been steep enough to lower the average US home price, which recently notched a fresh record. The median price for a home fell $3,000 last week to $416,623, according to Redfin data. That’s the first decline recorded so far in 2024, though home prices are still up around 4% year-over-year, it noted.
“Together, those metrics suggest sale-price growth could soften in the coming months as persistently high mortgage rates turn off homebuyers,” the report said.
The 30-year fixed mortgage rate has ticked higher, spiking past 7% in the last week of May, according to according to Freddie Mac data.
High borrowing costs have been a major deterrent to prospective home buyers, many of whom are choosing to wait out the market until rates fall.
“The market is slower than usual,” Christine Chang, a California-based Redfin agent said in a statement. “People who are buying right now are typically doing so because they’re having a baby or looking for a more family friendly home.”
That pullback has helped ease the imbalance of supply and demand, given that the shortage of inventory pushed home prices higher for most of the past year. Redfin data shows that pending home sales are now down 3% year-over-year, while new listings are up 7.8%.
Real estate experts are generally expecting the housing market to become more affordable in the coming years, as more inventory makes its way to the market and borrowing costs ease. Home prices have probably peaked, according to Charles Schwab strategists, who are anticipating a “stabilization” in sales and price growth ahead.
