Buyer's Market Is Emerging As Homes Sell Below List Price For First Time Since Pandemic

Homes are selling below their asking prices for the first time in late spring since the onset of the COVID-19 pandemic, signaling a potential return to a buyer’s market.

According to a report issued by Redfin, during the four weeks ending June 23, the typical U.S. home sold for 0.3% less than its list price, marking a pivot from the same period in previous years when homes consistently sold at or above asking prices. Just one year ago, homes were selling for exactly their list price, while two years ago, they sold 2% above the list price.

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A change in supply and demand underpins the move. New listings have surged 8.2% year over year nationwide, the report said, while pending home sales have dropped 4.3% — the largest decline in four months. The increased inventory gives buyers more options and, consequently, more negotiating power.

Further evidence is seen in the declining share of homes selling above the asking price. Only 32.3% of homes sold were over the listed price during the period Redfin analyzed, the lowest share for any late spring since 2020, down from 36% a year earlier.

Sellers are also adjusting their strategies in response to the changing market. On average, nearly 7% of home sellers reduced their asking prices — the highest level since November 2022 and up from 4.7% a year ago.

Despite the shifts, affordability remains a hurdle for many potential buyers. The median home sale price has reached an all-time high of $397,250, up 4.9% year over year. Mortgage rates, while down from May’s six-month high, are still hovering near 7%, resulting in a typical homebuyer’s monthly payment just $50 below all-time highs at $2,785.

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According to the Mortgage Bankers Association, mortgage purchase applications increased 1% week-over-week as of June 21, though they remain down 13% year-over-year. The Redfin Homebuyer Demand Index, which measures requests for tours and other homebuying services, was up 5% from a month earlier but down 14% year-over-year.

"Some buyers think they can get a deal because they're hearing the market is cool, and some sellers think every home will sell for top dollar no matter the condition," Marije Kruythoff, a Redfin agent, was quoted in the report. "In reality, everything depends on the house and the location."
 

In cities where inventory has increased more rapidly, buyers find greater negotiating opportunities. For example, the median sales price of homes in pandemic-era boom towns like San Antonio and Austin, Texas, declined 2.5% in the period tracked by Redfin.

As the summer progresses, experts anticipate that home prices will moderate further. However, they caution that much depends on broader economic factors, including inflation trends and Federal Reserve policies that could impact mortgage rates.

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