A significant number of sellers in the US are cutting prices as high mortgage rates and fears of a potential recession deter many potential buyers.
A recent Redfin report showed that more than 25% of home sellers in three-quarters of the subways tracked by the brokerage nationwide cut their asking prices in June.
In some areas, more than 60% of sellers have cut prices, which the report says “has become commonplace in the chilled-out housing market, especially in locations that were popular with homebuyers earlier during the pandemic.”
Thirty-year mortgage rates are much higher than they were at the beginning of the year, which is “really eating into homebuyers’ budgets,” Redfin chief economist Daryl Fairweather told FOX Business.
Mortgage buyer Freddie Mac said fixed rates on 30-year mortgages averaged 5.54% this week, compared to 5.51% a week earlier.
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Some homebuyers have had to exit the buying market entirely and face the rental market, while others are still in the game but are “much less willing to bid at the asking price or entertain overpriced homes,” Fairweather added.
Because buyers are “more nervous,” sellers make concessions and cut prices. Fairweather said sellers no longer have the luxury of choosing between dozens of offers, as they did earlier this year.
According to the analysis, Boise, Idaho had the largest proportion of buyers, 61.5%, who lowered their asking prices. This is up from 25.7% in June 2021.
Denver, Colorado and Salt Lake City, Utah weren’t far behind, with 55.1% and 51.6% of sellers cutting their prices, according to the report.
Nearly half of salespeople in Tacoma, Washington; Grand Rapids, Michigan and Sacramento, California also cut prices.
According to Redfin, Boise, Salt Lake City, Sacramento and Tampa were popular hotspots between summer 2020 and March 2022 “as homebuyers moved out of expensive coastal job centers, taking advantage of low mortgage rates and remote work.” .
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However, their popularity worked against them.
“Their popularity has led to intense competition for a limited number of homes for sale, driving prices up and making them out of reach for many buyers,” the report says.
For example, in May, a typical Boise home sold for $550,000, up 60% from two years ago, according to the report. Similarly, prices for a typical Sacramento home rose 44% to $610,000.
“Consumer sentiment is also making homebuyers reluctant to spend their budgets,” Fairweather added.
Fairweather said homebuyers are not only concerned about the continued rise in inflation, but also about what will happen if the economy falls into recession and unemployment rises.
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“Homebuyers don’t want to be in a situation where they can’t afford a mortgage because they don’t have the income they thought they should have,” Fairweather added.
Here are the top ten metros in which the largest share of sellers fell.ping their prices in June:
- Boise, Idaho: 61.5%
- Denver, Colorado: 55.1%
- Salt Lake City, Utah: 51.6%
- Tacoma, Washington: 49.5%
- Grand Rapids, Michigan: 49.3%
- Sacramento, California: 48.7%
- Seattle, Washington: 46.3%
- Portland, Oregon: 45.7%
- Tampa, Florida: 44.5%
- Indianapolis, Indiana: 44.1%
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