Housing Market Shows Signs of Favoring Buyers as Price Cuts Increase

The housing market is beginning to shift in favor of buyers, as recent data from Realtor.com reveals a notable increase in price reductions. In July, 18.9% of available listings experienced price cuts, marking a 3.4% rise from the previous year and the highest level in two years. This trend is particularly unusual for July, a month typically characterized by peak home sales. According to Ralph McLaughlin, a senior economist at Realtor.com, higher mortgage rates and the anticipation of lower rates in the fall have led to decreased buyer activity, prompting sellers to lower prices to attract interest. Among the 50 metropolitan areas analyzed, 47 reported an increase in price reductions compared to last year. McLaughlin noted that while sellers enjoyed rising prices in recent years, the impact of higher mortgage rates has forced them to adjust their price expectations. This shift reflects a broader affordability crisis in the housing market, exacerbated by the reluctance of sellers who secured low mortgage rates during the pandemic to enter the market, thereby limiting supply. Economists forecast that mortgage rates will remain elevated throughout most of 2024, with potential declines only occurring once the Federal Reserve begins to cut rates. As of now, the average rate on a 30-year mortgage has decreased to 6.47%, the lowest in over a year, yet it remains significantly higher than the pandemic-era lows of around 3%. Currently, approximately 80% of mortgage holders benefit from rates below 5%, contributing to the ongoing supply constraints in the market.