Buyers Gain Power as Stale Listings Pile Up and Price Drops Become Common By Dana Anderson Housing costs could come down in the coming months, as mortgage rates are coming down a bit and there are signs price growth could slow. Redfin agents report there is room for buyers to negotiate paying under list price for homes that need a bit of work. Pending sales post their biggest decline since the beginning of March // Pending home sales fell 3.8%, the biggest year-over-year decline in nearly four months, during the four weeks ending June 16. Buyers are shying away from earlier steps in the house-hunting process, too: Redfin’s Homebuyer Demand Index, a measure of requests for tours and other buying services from Redfin agents, declined 17% year over year to its lowest level since February. Buyers are backing off largely because housing costs are high // The median U.S. home-sale price is up 4.8% to an all-time high of $396,000, and the median monthly mortgage payment is $2,781, about $60 below its record high. The weekly average mortgage rate declined slightly to 6.95% this week, but it’s still more than double pandemic-era lows. The irony of near-record-high housing costs // They are causing buyers to back off, and enough have backed off to give buyers who remain more negotiating power for certain homes. The other piece of good news for buyers is that housing costs could come down soon. There are signs that price growth could lose some momentum: The share of sellers dropping their list price is at its highest level since November 2022, and asking-price growth has already slowed. Mortgage rates have fallen a bit since last week’s cooler-than-expected inflation report, and they may continue declining. New listings are still near historic lows // Another reason for the decline in pending sales is a lack of new, desirable listings for buyers to choose from. New listings are up 7.7% year over year, but they’re sitting well below typical levels for this time of year; the only time on record listings June listings have been lower was in 2023. Many home listings are becoming stale, sitting on the market for 30 days or longer without going under contract; Redfin agents report that most buyers are willing to pay sky-high housing costs only for move-in ready homes in popular neighborhoods. “A few years ago, I never would have told a seller they need to freshen up their paint, fix their furnace and make sure their roof is up to date before putting their home on the market — but now, I tell them to make the house as pretty as they possibly can,” said Des Bourgeois, a Redfin Premier agent in the Detroit area. “Buyers are still out there and they’re willing to pay today’s high prices, but only if the house is in really good shape. They don’t want to spend extra money on paint or new appliances.” Homes that need work and/or aren’t in the most desirable locations can be a good opportunity for today’s buyers // They are selling under asking price in some places–if they do sell. “Things have reversed since the pandemic,” said Jonathan Ader, a Redfin Premier agent in the Palm Springs, CA area. “Now, most homes — the exception is relatively affordable homes that are move-in ready — are selling under asking price.”
Home Prices Have Doubled Over the Last Decade By Dana Anderson, Redfin Nearly two of every five (38%) homeowners do not believe they could afford to buy their own home if they were purchasing it today. This is according to a Redfin-commissioned survey of roughly 3,000 U.S. residents conducted by Qualtrics in February 2024. The relevant question was: “If you were looking to purchase a home, do you think you could afford a home like yours in your neighborhood today?” Nearly three in five (59%) homeowners who answered this question have lived in their home for at least 10 years, and another 21% have lived in their home for at least five years. That means the majority of respondents have seen housing prices in their neighborhood skyrocket since they purchased their home: The median U.S. home-sale price has doubled in the last 10 years, and has shot up nearly 50% in the last five years alone. Home prices have soared over the last decade for several reasons. Already-high home prices skyrocketed during the pandemic, when remote work and ultra-low mortgage rates motivated many Americans to move and buy homes. Even before the pandemic buying boom, home prices were increasing due to a prolonged supply shortage, along with a strong labor market and growing population pushing up demand. Rising mortgage rates are another reason many homeowners could not afford their own home if they were to buy it today. The typical person purchasing today’s median-priced home for $420,000 has a record-high $2,864 monthly housing payment with a 7.1% mortgage rate, the current 30-year fixed-rate average. If they were to purchase a home for the same price with a 4% mortgage rate, which was common in 2019, their monthly payment would be $2,210, roughly $650 less. “Rising home prices are a double-edged sword. On the one hand, Americans who already own homes benefit from rising values and they can consider themselves lucky they broke into the housing market while they could still afford it.” said Redfin Senior Economist Elijah de la Campa. “On the other hand, price appreciation makes the prospect of buying a new home daunting or even impossible for many people who want to move. Prices have risen enough that a similar home and location would be much pricier than a home someone already owns–even accounting for inflation. Add elevated mortgage rates to the equation, and moving up to a bigger, better home is even more costly and perhaps out of reach.” The situation is especially dire for first-time buyers, who have not built up equity from the sale of a previous home. Nearly 40% of U.S. renters don’t believe they’ll ever own a home, up from 27% last year. Of the Gen Zers and millennials who do expect to buy their first home soon, more than one-third (36%) expect to use a cash gift from family to help with their down payment. Broken Down by Generation Baby boomers are least likely to be able to afford their current home if they were to buy it today. Nearly half (45%) of baby boomers said they could not afford a similar home in their neighborhood now, compared to 39% of Gen Xers and 24% of Gen Zers and millennials. That stands to reason, as baby boomers are more likely to have bought their home a long time ago for a much lower price. That dynamic contributes to the shortage of homes for sale: Empty-nest baby boomers own twice as many large homes nationwide as millennials with kids, largely because older Americans, with no financial incentive to sell, are hanging onto their homes. Unsurprisingly, lower-income homeowners are least likely to be able to afford their own home today. More than half (51%) of respondents earning under $50,000 annually would not be able to afford their home, compared to 34% of people earning $50,000-$100,000 and 21% of people earning more than $100,000.