Home sales for the month are down, and home sellers nationwide, especially in pandemic boomtowns like Boise and Sacramento, have cut prices in response to cooling demand.
Inflation and rising home prices have put home buying out of reach for many consumers. But the picture isn’t all gloomy.
July home sales dropped 19% year-over-year
Home sales for July dropped 19.3% year-over-year—the biggest annual decline in home sales in over 12 months. Though mortgage rates have dropped to around 5.4%, they’re still too high for potential homebuyers who are already struggling financially.
Now at their lowest level since the start of the pandemic, home sales for July are 4.1% lower than the previous month, making this the sixth-straight month of decline.
And with the drop in new listings, combined with steadily rising home prices and discouraged homebuilders, that decline is likely to continue.
Buyers and sellers sidelined
Buyers and sellers have both backed away from the housing market—for different but related reasons.
Mortgage rates peaked near 6% earlier this year, pricing many prospective homebuyers out of the market. But some buyers held off for fear home values would drop in the near future.
Sellers largely backed off due to cooling buyer demand. And the drop in new listings meant remaining sellers had less competition for buyer interest. With inventory still being low, prices are likely to continue rising, though more slowly than before.
Sellers and homebuilders both have adjusted prices to prevent buyer cancellations. With inflation tightening everyone’s belts, buying a home has become more difficult for many.
So, it’s no surprise that homeowners who locked in a low mortgage rate are hesitant to trade it in for a higher one.
The share of homes with price cuts reached a record high
The percentage of listings with price cuts hit a record high in July, with more than 15% of home sellers nationwide cutting their prices.
Home sellers in pandemic boomtowns like Boise, Sacramento, and Salt Lake City were even more likely to cut prices. In fact, nearly 70% of homes for sale in Boise saw a price cut in July, followed by Denver with 58%, Salt Lake City with 56.4%, and Tacoma, WA with 54.8%.
Portland, OR, sitting at the number 10 spot on the list of pandemic hotspots now cutting their prices, saw price drops in 48.3% of its home listings in response to cooling buyer demand.
Homeowners and builders cut prices early this summer, mainly because their original prices no longer fit the market. They’d priced too high because they’d heard of homes in their market that sold for an eye-watering price a few months earlier.
Those stories bear little resemblance to the current market.
It is essential to know how to advise sellers to price their homes correctly from the beginning. Discuss recent sales data for their neighborhood and current days on market to help manage seller expectations.
Nice homes in desirable neighborhoods still sell at or above a realistic asking price, though they might take a bit longer.
No recession for home prices
NAR’s Chief Economist Lawrence Yun agreed that the economic recession in the U.S., among other factors, has impacted home sales and home building. However, he doesn’t see a recession in home prices.
Inventory remains tight and prices continue to rise nationally with nearly 40% of homes still commanding the full list price.