Daniel Acker | Bloomberg | Getty Images
More home sellers are cutting their asking prices as higher mortgage interest rates and inflation slow down competition in the housing market.
Some cities see more price cuts than others. Boise, Idaho, took the lead in June, with 61.5% of sellers cutting asking prices, according to a new report from Redfin, a real estate brokerage.
Boise has been one of the hottest pandemic markets, with a work-from-anywhere culture prompting thousands of people to flee higher-priced markets like San Francisco and Los Angeles. A year ago, a quarter of the sellers in Boise had lowered their prices.
Top 10 markets witnessing cuts in asking prices:
- 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%
Many of these markets have seen massive price hikes during the pandemic that simply weren’t sustainable as interest rates rose. The average 30-year fixed-rate mortgage is now double what it was at the beginning of this year. This makes the cost of ownership much higher.
Boise has seen its home prices rise more than 60% from pre-coronavirus levels. Nationally, home prices are up about 39% since March 2020, when Covid was declared a pandemic, according to the S&P Case-Shiller Index.
Read more real estate coverage
“High mortgage rates and a potential recession are causing potential buyers in popular immigration destinations to press the pause button, and they are having a huge impact on workers in large duty stations who rely on their stock portfolio for down payments,” Shahryar said. Bukhari, chief economist at Redfin.
The competition is also cooling because there is now an oversupply in the market. Inventories hit a record low during the pandemic, but now, with homes staying longer and demand waning, it’s finally rising. Active inventory was up 28% last week compared to the same week a year ago, according to Realtor.com.
Real estate markets are still undersupplied compared to 2019, but they are moving in the right direction. However, housing is still much less expensive than it was before the pandemic. For a household with an income of $75,000, only 23% of homes on the market are affordable today, down from 50% of inventory in 2018, according to Realtor.com.
“While these trends are leading to a cooler-than-normal summer home-buying season, the way forward points to a promising shift, away from acute supply shortages in 2021 and a win-at-any-cost competition,” said George Ratio, chief economist at Realtor.com. . .
