According to Redfin, the Seattle-based, technology-powered real estate brokerage firm, an increasing number of home-sellers are dropping their prices, yet another sign that the early 2022 housing frenzy is starting to ease as mortgage rates rapidly approach 5%.
Redfin is reporting that during the four-week period, ending on April 3, 2022, 12% of homes for sale had a price drop, up from 9% a year earlier and the highest since early December 2021. The report notes that the rate of sellers dropping their prices is growing faster that it has since August 2021.
In remarks prepared for the release of the report, Daryl Fairweather, Redfin’s Chief Economist said, “Price drops are still rare, but the fact that they are becoming more frequent is one clear sign that the housing market is cooling. It goes to show that there’s a limit to sellers’ power. 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.”
“As the cooldown continues to set in, it is important that seller’s price their home carefully. Homes that sit on the market for several days have a scarlet letter that makes them more difficult to sell,” Fairweather added. “Buyers should be wary of bidding significantly over asking on newly listed homes and take a closer look at the homes that have been on the market for more than a week.”
The report also points to other early indicators that are signaling 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 homebuying 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.
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