As rising mortgage interest rates and inflation have reduced competition in the housing market, more property sellers are lowering their asking prices.
More price reductions are occurring in some cities than in others. In June, Boise, Idaho, took the top spot for price reductions, with 61.5 percent of sellers there lowering their asking prices, according to a recent survey from real estate company Redfin.
Boise was one of the more popular pandemic markets as thousands of people fled more expensive markets like San Francisco and Los Angeles due to the “work-from-anywhere” lifestyle. Only around 25% of Boise sellers had lowered their prices a year prior.
Top 10 markets where asking prices are declining:
Idaho’s Boise: 61.5 percent
Colorado’s Denver: 55.1 percent
-51.6% in Salt Lake City, Utah
-49.5% in Tacoma, Washington
-49.3 percent in Grand Rapids, Michigan
-48.7% in Sacramento, California
Seattle, Washington: 46.3%
-Portland, Oregon: 45.7%
-44.5 percent in Tampa, Florida
-44.1 percent in Indianapolis, Indiana
Massive price hikes in several of these markets during the epidemic were simply unsustainable as interest rates increased. The 30-year fixed mortgage’s average rate has nearly doubled since the year’s beginning. Because of this, the cost of ownership is significantly higher.
Boise’s housing costs increased by more than 60% from pre-coronavirus levels. According to the S&P Case-Shiller Index, national housing values have increased by around 39% since March 2020, when Covid-19 was declared a pandemic.
According to Sheharyar Bokhari, a senior economist at Redfin, “higher mortgage rates and a potential recession are causing potential buyers in popular migration destinations to press the pause button, and they’re also having a big impact on workers in big job centers who rely on their stock portfolio for down payments.”
The fact that there is now more supply on the market is also causing the competition to slow down. During the epidemic, inventory fell to an all-time low, but it is currently rising as homes lie empty for long and demand declines. According to Realtor.com, active inventory increased by 28% last week compared to the same period last year.
Compared to 2019, the housing markets are still under supplied, although they are improving. However, housing is still significantly more expensive than it was before the pandemic. According to Realtor.com, only 23% of homes on the market are affordable for a family making $75,000 now, down from 50% of the inventory in 2018.
According to George Ratiu, senior economist at Realtor.com, “While these tendencies are causing a colder summer home-buying season than typical, the road ahead signals towards a favorable transition, away from 2021’s chronic under-supply and win-at-all-costs competition.”