What’s going on with home prices?
The market is changing. Mortgage rates have risen sharply in the last few months, and the inventory or homes for sale is finally increasing in many markets across the country. Two things are apparent. First, home prices are continuing to rise. Second, sellers don’t have as much of an advantage as they’ve recently had and are needing to reduce their asking prices. This last point doesn’t mean prices are dropping, just that prices are increasing at a slower rate.
What’s going on with prices now?
The fact is, the market is becoming more balanced between buyers and sellers. One national real estate website found that the percentage of homes having to do price cuts rose in both March and April, with April’s percentage higher than a year ago. Another national real estate site reported that as of the end of May, one in five homes listed dropped their price during the prior four weeks. The price reductions are also getting larger. In December 2017, the mean price cut was just over $12,000. By April this year, the reduction was more than $23,000. However, prices are still rising. In May, the median sales price of a home was 16% higher than a year ago, asking prices were 17% higher, and 57% of homes sold above the asking price.
Economists have been expecting price growth to slow, so we must remember that these numbers don’t reflect today’s conditions, especially since May’s deals probably locked in lower mortgage rates months ago. In addition, pent-up demand, rising wages, and the desire to lock in rates have created enough buyer demand to keep asking prices rising and time on the market low. Nevertheless, sellers are having to cut prices, and those cuts are becoming larger. Yet the prices homes close at remain above where they were last year.
How about prices in the near future?
What’s been going on now may indicate what’s likely to happen the rest of the year. Many economists predict slower growth in sales prices. They see buyer demand decreasing in the face of rising mortgage rates and more homes coming onto the market. These are signs that we could see a market that’s more balanced between buyers and sellers. Some economists think mortgage rates are likely to stabilize, others believe rates will continue to rise.
So, whether you’re thinking of buying or selling, it might make sense to act sooner—at today’s prices and mortgage rates.
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