Prices are dropping for a higher percentage of home listings in the latest sign the Covid-19-fueled housing market may have peaked.
About 4.7% of listings for the four weeks ending Aug. 1 had price drops, according to real estate firm Redfin, compared to 3.7% during the same period last year. It is also near the prepandemic level of 4.9% during the same period in 2019 in the latest sign the housing market may be cooling off after a period of rapid price appreciation.
“Asking prices are still high, but the share of listings with price drops is rising steadily and nearing prepandemic levels. We are past the peak for this intense seller’s market and home sellers are increasingly having to lower their expectations. Buyers are regaining some negotiating power, but it still depends on the location and the desirability of the home,” said Redfin economist Daryl Fairweather in a statement to The Business Journals.
The median home sale price also slipped in July, by about 0.2% to $362,750 – the first time since March it has not increased month-over-month, according to data from Redfin. It is still up 18% over the same time in 2020, however. Active listings also continues to creep up to about 640,286 as of Aug. 1, down about 26% year over year but still better than any point during 2021.
While asking prices for newly listed homes are still up 12% from the same time a year ago, they are down 1% from their all-time high posted during the four weeks ending June 27, according to Redfin.
The short version? The housing market remains hot, but multiple signs suggest it might not be quite as hot as it was at the beginning of the summer.
“Many homes are fetching multiple offers, but if you find a home that has been on the market for a few weeks, you may be able to get it for below the list price and with inspection and financing contingencies intact. A homeowner who is thinking of selling to buy again is going to have a much easier time now than they would have back in March. That’s because it’s becoming less competitive to buy and it is still a historically good time to sell,” Fairweather said.
The high home prices have indeed pushed many homeowners to sell, but those same high prices also discourage them from buying a new home, according to a recent study from Rent.com. About 46% of those selling their homes did so for the high prices they could get, but 45% said they are not buying a new house as their next housing choice. About 20% plan to move into a temporary rental, while 10% plan on renting long-term, according to Rent.com.
But there had already been signs the market might be turning, with new home listings surpassing prepandemic levels earlier in July, according to reporting by Ashley Fahey, real estate editor at The Business Journals.
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Home sellers are also still seeing big profits from the sale of their homes, although the return on investment slipped in the second quarter, according to a separate study from Attom Data Solutions LLC.
Meanwhile, Covid-19 has changed how homes are marketed and listed. In 2019, the most popular home features and amenities in home listings were granite countertops, hardwood floors and stainless steel appliances. But now, after 18 months of a pandemic, the top amenities listed in homes for sale were garages, walk-in closets and full bathrooms, reflecting the changing desires of potential buyers.