US Housing Market Cooling: Buyers Benefit from Price Reductions
The US housing market is showing signs of cooling down, potentially creating opportunities for homebuyers as prices see reductions, according to Zillow. Typically, the fall months bring a cooling effect to the housing market, but this year has seen more homes with price cuts compared to previous years. Zillow reported that the percentage of home listings with price cuts reached 9.2% in the week ending September 16, exceeding the 7.9% rate for the same period in 2019. This increase is considered “unusually high,” even accounting for seasonal variations.
Several factors have contributed to this trend, making the housing market slightly more affordable. While home prices rose over the past year due to a shortage of inventory, the supply has started to improve in recent weeks, with new home listings increasing by 4% month-over-month in August. Demand, which had been driving prices higher, has also softened as buyers face pressure from rising mortgage rates. The average 30-year fixed mortgage rate recently reached 7.31%, the highest in nearly 23 years, and weekly mortgage applications fell by 1.3%, according to the Mortgage Bankers Association survey.
Zillow’s senior economist, Jeff Tucker, noted that for determined buyers with sufficient budget flexibility to accommodate higher mortgage rates, this fall presents a favorable opportunity. There are more motivated sellers and a higher number of active listings than at any time since the previous December, improving the chances of finding the right property.
However, experts caution that significant improvements in affordability are unlikely until mortgage rates decrease, a scenario that may not occur in the near future. Redfin estimated that rates might ease to around 6% by the end of 2023. Despite the current cooldown, Zillow economists previously predicted home price increases through the first half of 2024, with potential price jumps of up to 5% by August 2024, according to the firm’s research team.