The housing market is showing signs of cooling down as home prices, although still higher than a year ago, are seeing shrinking gains. Reports indicate that sellers are starting to lower their prices after facing a stagnant spring market. For the first time since the Covid-19 pandemic began, the typical house sold slightly below its asking price, marking a shift from previous years where homes were selling at or above list price.
Despite the slight decrease in price gains, the housing market is not crashing. While a majority of homes are still selling above the asking price, the share of homes selling at this rate has decreased since June 2020. Sellers are facing challenges in commanding high prices as mortgage rates remain high, with the average rate on the 30-year fixed mortgage hovering above 7% for several months.
Home prices have seen a steady increase, with a 6.3% growth rate in April compared to the previous year. However, May showed a slight dip in price growth to 4.6%, marking the slowest growth rate in seven months. The increase in supply is contributing to the cooling of prices, with total active listings now 35% higher than a year ago. Despite this growth, inventory levels are still more than 30% lower than pre-pandemic levels.
Buyers are under the impression that they can secure better deals in the current market conditions, while some sellers are holding out for top dollar regardless of the condition of their homes. This disparity in expectations is creating a more balanced market where negotiation and compromise are becoming essential for successful transactions.
The housing market is showing signs of cooling down as price gains shrink and inventory levels increase. Buyers and sellers are adjusting their expectations in response to changing market conditions, leading to a more balanced and competitive real estate landscape. It remains to be seen how these trends will evolve in the coming months and whether the market will continue to stabilize or experience further fluctuations.
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