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Breaking News: US Home Sellers Shake Things Up by Slashing Prices After a Year of Stability

A growing number of home sellers are cutting prices to attract hesitant buyers amid high costs and interest rates, with the median asking price dropping to $417,000. This trend, coupled with persistently high mortgage rates, may lead to a softening in sale-price growth. The housing market sees relief as mortgage rates decline slightly, but buyers still face record-high prices due to a shortage of homes and rising construction costs. Sellers with low mortgage rates are reluctant to sell, further limiting supply.

Staff Editor June 4, 2024

The housing market is experiencing a shift as sellers are resorting to price reductions in a bid to attract lukewarm buyers grappling with high costs and steep interest rates. The median asking price for a typical home on the market has decreased by approximately $3,000 to $417,000, marking the first deceleration in prices in six months. This trend indicates that the growth in sale prices may soften in the upcoming months due to the deterrent effect of persistently high mortgage rates on potential homebuyers.

Although there was a slight reprieve for buyers towards the end of May, with monthly housing payments dropping to a six-week low owing to a modest dip in mortgage rates, many Americans are still facing record-high costs when purchasing a home. The median home sale price has surged to $390,613, the highest level on record, reflecting a 4.3% increase from the previous year. The housing market’s current challenges stem from years of underbuilding, leading to a shortage of homes compounded by the surge in mortgage rates and costly construction materials.

The housing market is further constrained by the “Golden handcuff” effect caused by the rise in mortgage rates over the past few years. Sellers who secured historically low mortgage rates of 3% or less during the pandemic are now hesitant to sell, tightening the housing supply and limiting options for eager buyers. Economists anticipate that mortgage rates will remain elevated throughout 2024 and are projected to decrease only once the Federal Reserve initiates rate cuts. It is unlikely that rates will revert to the lows witnessed during the pandemic, with predictions indicating one or two rate reductions this year.

Freddie Mac reported a slight rise in the average rate on a 30-year loan to 7.04%, down from the peak of 7.79% in the fall but significantly higher than the pandemic-era lows of 3%. A Zillow survey revealed that most homeowners are more inclined to sell their homes if their mortgage rate exceeds 5%, yet currently, around 80% of mortgage holders have rates below 5%. The evolving dynamics of the housing market underscore the intricate interplay between mortgage rates, seller strategies, and buyer preferences, shaping the landscape for real estate transactions in the foreseeable future.