As borrowing costs continue to rise, the U.S. real estate market is experiencing a significant cooling, and a large number of sellers are cutting prices to facilitate transactions.
Tracking data from Zillow, the largest real estate information website in the United States, shows that among the 50 largest metropolitan areas in the United States, the proportion of housing price reductions in May reached 11.5%, which was higher than the 8.2% in the same period last year. Salt Lake City , Las Vegas and Sacramento, California, where prices have risen rapidly before, have seen the fastest growing proportion of listing price declines.
The main reason for the soaring housing prices in these areas is that out-of-town home buyers moved in during the epidemic and competed with locals for the limited housing supply. Throughout 2020, migration nearly tripled in the Salt Lake City metro area, which includes Provo and Ogden. The in-migration trend has begun to reverse, with Salt Lake City recording a net outflow for the first time in the first quarter.
Market analysis believes that the continued attack on affordability by rising house prices and rapidly rising mortgage rates led to a slowdown in home purchase applications in May. Inflationary pressures and mortgage rates above 5% are both headwinds for the housing market in the coming months.
In response to sellers lowering their listing prices, Redfin's chief economist Daryl Fairweather commented:
There are two types of sellers in today's market: those who already know the market is cooling, and those who understand the market cooling during the sales process.
The former, hoping to sell quickly before the market slows down further, are willing to sell immediately for slightly less than comparable homes nearby, while the latter may have to drop the price if their home fails to attract buyers within a few weeks.
U.S. 30-year fixed mortgage rates surged above 6% at the fastest pace (slope) on record, a level last seen as the Fed aggressively hikes to curb inflation, according to the latest Redfin data This was before the U.S. real estate bubble burst in 2008.
In the past six months alone, the median monthly mortgage payment in the United States has increased by nearly $800.
With mortgage rates soaring to their highest levels since 2008, the number of potential homebuyers has plummeted and sellers are starting to lower their list prices.
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