Home prices may have hit a new high, but the real estate market is showing signs of weakness that could help buyers negotiate a lower price on a house.
For the four weeks ending June 30, homes sold for 0.3% below asking price, according to a recent report by online real estate brokerage Redfin. June 2024 was the first time homes have sold below asking price since 2020, the report says.
Homes are also taking longer to sell, with the median number of days on the market increasing to 32, a 5-day increase from a year ago.
“The market is softening,” says Daryl Fairweather, chief economist at Redfin. “Given current conditions, sellers are having to be less aggressive with their pricing.”
Homes selling for less than asking price is a milestone for buyers who have been frustrated by rising home costs over the past few years. But if anything, it’s a momentary correction in a real estate market that still favors sellers.
Demand for homes still exceeds supply, which is why U.S. home sale prices have increased 4.9% in the last year to a median of $397,954, according to Redfin data.
But there’s been some recent pull back on demand, too, largely driven by high mortgage rates hovering around 7%, along with a low inventory of homes compared with pre-pandemic levels, says Fairweather.
“Buyers feel like there just aren’t homes on the market to justify their price, given how expensive it is to borrow,” she says. This helps explain why three out of five homes listed in May are considered stale, in that they were listed for a month without going under contract, per Redfin data.
Whether this trend will continue is another matter. That’s because the Federal Reserve is expected to announce federal funds rate cuts that will help lower mortgage rates before the end of the year.
Considering that many would-be buyers have been priced out of the market by high mortgage rates, lowering rates would increase the number of potential buyers able to afford a home. This would “boost demand” and potentially accelerate price gains, says Fairweather.
Homebuyers are more likely to negotiate a lower asking price on a home listing that’s been on the market for more than a couple of weeks, says Fairweather. “You can probably come in with an offer that’s 5% lower than list price,” she says.
“If it’s been on the market for two weeks or longer, the seller is probably feeling some pressure from not getting any offers and will be receptive to hearing the offer.”
Markets can vary, however. In some places it’s unusual for homes to sell under the asking price, like in the San Francisco Bay area, she says. Conversely, sellers in markets like Florida tend to price their homes higher and then sell for less.
However, if a price difference of 5% will “make or break” your finances, you might want to consider whether you can truly afford a given home. Ideally, you’d want more of a financial cushion to cover the unexpected costs in owning a home, says Fairweather.
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