New data shows higher interest rates, like the ones instituted by the Federal Reserve on July 27, are succeeding in slowing down the housing market, while at the same time, shifting power from sellers to buyers.
June 2022 set a record for home prices when the median national home price for active listings was $450,000, according to Realtor.com. That represented an annual growth rate of 16.9% compared to the median listing price in June 2021, but a much smaller growth rate compared to May when the median listing price was $447,000.
The trends show a continued increase in home prices, but a much smaller increase compared to previous months, which is indicative of more homes staying on the housing market for longer periods of time, says Sam Boik, a mortgage loan originator in Colorado.
According to the National Association of Realtors, contract signings for home purchases, or deals signed but not yet closed, fell 8.6% in June 2022 compared to May 2022, a number that was well above what economists were predicting and a 20% drop from last year.
“There’s more inventory that’s lingering on the market for a longer period of time and then those buyers that may have been interested are no longer willing to purchase, so those motivated sellers do have to do something to incentivize these buyers to still purchase within this market,” she said. “Oftentimes, that will lead to a drop in prices and that can actually save buyers thousands of dollars and it’s a really good thing for them.”
In our country’s 50 largest cities, the share of homes that have reduced their prices has nearly doubled since April. In Buffalo, 7% of homes on the market reduced their prices since last month. In Cincinnati, that number was 9.2%. In Detroit, it was 17.1%, and in Phoenix and Las Vegas, it was 29.5% and 30.6% respectively. Meaning if you are buying, you could be looking at an overall home value that could be thousands of dollars cheaper than it was last month, according to Boik.
“The times that you start to see these properties drop in price— if buyers move forward, they also have more power to negotiate with sellers, to negotiate for a lower price, to potentially negotiate for seller concessions,” said Boik.
With speculation of more interest rate hikes down the road, there is the possibility this power shift increases even more as more people are deterred from purchasing homes. Boik suggests looking at your personal finances and seeing if the savings in home value offsets the more money you will pay each month due to the rate hikes.