The housing market is experiencing a significant shift as home sellers face challenges in finding buyers. Skyrocketing housing values and a shortage of homes previously gave sellers the upper hand, but now, many are forced to lower prices or offer incentives to attract buyers. This change is driven by a decrease in home shoppers who can afford to buy and uncertainty surrounding the economy, jobs, and mortgage rates.
In regions like the South and West, sellers are more likely to offer buyers better deals, including lower prices, funds for closing costs, and money to reduce mortgage rates. According to NPR, the housing supply has increased, and home price growth has slowed, giving buyers more options and negotiating power. However, many potential buyers are still holding off, hoping for further declines in mortgage rates and prices.
Mortgage rates have recently edged down, partly due to expectations that the Federal Reserve might cut its key interest rate. However, mortgage rates are tied to the 10-year Treasury yield, not directly to Fed policy. As a result, buyers waiting for significant rate drops might be disappointed. Despite this, finding an affordable home is becoming more realistic in some areas.
The S&P CoreLogic Case-Shiller Home Price Index reported a 1.9% annual gain in June, the slowest since mid-2023. While prices remain high, regional variations are evident, with Sunbelt markets like Phoenix, Tampa, and Dallas experiencing small price declines. In contrast, industrial hubs such as New York, Chicago, and Cleveland have recorded gains.
The National Association of Realtors (NAR) reported a 2.0% increase in monthly sales in July, indicating improving affordability. However, sales of newly built homes decreased by 0.6% between June and July, and prices eased further. Builders are offering more incentives to entice buyers, but the growing inventory of existing homes provides more options and negotiating power.
As the housing market continues to evolve, sellers must adjust their price expectations to reflect the changing landscape. With mortgage rates remaining above 6%, hopes for significant improvement are dwindling. However, experts believe that a return to a more “normal” rate range could help stabilize the market.
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