- The US housing market is starting to flash a few rays of sunshine for prospective homebuyers.
- Inventory is growing at a time of year that usually sees declines, Altos Research said.
- And Redfin reported that more home sellers are lowering their asking prices.
A glint of hope is starting to emerge for US homebuyers, who have largely been pushed out of the market amid soaring prices and a widespread supply crunch.
It comes as the housing market has been stuck, with sales activity stalling as high rates discourage buying and selling. In fact, the situation is so bad that Redfin CEO Glenn Kelman recently declared the market has hit “rock bottom.”
But a few indicators may be cause for some optimism.
Home construction has continued driving up supply, causing the nation’s housing inventory to keep growing through a season that historically sees declines. Inventory rose 1.8% in the last week of September compared to the week before, Altos Research said, while cautioning that there’s no sign of a flood on inventory coming.
“It’s late in the summer, so normally new listing volume is declining, the last few sales of the peak summer months are concluding,” the real estate data firm wrote. “So the fact that inventory grew by nearly 2% this week and last week is quite telling for how home buyers are reacting to the highest mortgage rates in over 2 decades.”
More precisely, the 30-year mortgage rate hit the highest level in 23 years, climbing further above 7%. The surge in borrowing costs has been a major factor in keeping supply low, as homeowners who financed at much lower rates are reluctant to give that up by moving out.
High rates and rising prices have also contributed to the deterioration in home affordability. But there are also signs that prices may be headed lower.
Altos said more homes on the market have taken a price cut from their original list price, putting the latest share at 37%, which is more than what a normal balanced market would typically see.
Meanwhile, a separate report from Redfin also said more home sellers are dropping their asking price. During the four weeks ending September 24, 6.5% of US homes for sale had a price drop, an uptick from 5.8% in August.
“It’s still tough to win a home for under asking price, but sellers have come to terms with the fact that that 7%-plus mortgage rates are giving buyers cold feet and that homes aren’t as likely to attract multiple offers,” Redfin said.
In the existing home market, sellers are growing open to negotiating about the asking price, or offering concessions, like funding home repairs or a mortgage-rate buydown.
Meanwhile, builders are also adapting to market conditions, offering smaller properties or rate buydowns as well.
Entering the fourth quarter, sellers may have to become open to further price reductions, as expectations of a coming Federal Reserve interest rate hike may only heighten mortgage rates.
“The feeling for buyers right now is this: For the interest rate I’m paying, this home better be exactly what I want or the price better be negotiable,” Redfin agent David Palmer said in the firm’s report.