The share of home sellers dropping their asking prices in March reached the highest level recorded since early December, according to a Redfin report published on Thursday. Soaring mortgage rates are largely to blame, according to Redfin’s economists.
The report examined housing market data in over 400 U.S. metropolitan areas during the four weeks ending on April 3.
During this time period, 3% of homes for sale each week on average had a price drop, with 12% dropping their price over the course of the four-week period. A year ago, the share of homes with price drops was at 9%.
According to Redfin, price drops are typically flat month over month in March. Prior to the past four weeks, the largest spike in price drops recorded by Redfin was 0.9 percentage points in 2019.
The report attributed the increase in price drops to rising mortgage rates and suggests that the sellers’ grip on the market might be starting to loosen. Other indicators of a slowing market can be seen in mortgage purchase applications, which were down 9% compared to a year prior, and home tours, which were down 3% year-to-date according to data from ShowingTime.
“Price drops are still rare, but the fact that they are becoming more frequent is one clear sign that the housing market is cooling,” Redfin chief economist Daryl Fairweather said in a statement. “It goes to show that there’s a limit to sellers’ power. There is still way more demand than supply, and buyers are still sweating, but sellers can no longer overprice their home and still expect buyers to clamor at their door. That’s because higher mortgage rates are eating into homebuyers’ budgets.”
Despite the increase in the share of home sellers dropping their asking prices, the median asking price of newly listed homes during these four weeks rose 16% year over year to $399,675. The median home sale price was also up 16% year over year to $384,500. Overall, 52% of homes sold above list price, up from 41% a year prior and just below the all-time high of 54% recorded in July 2021.
As prices continue to rise, housing inventory remains low. During the four-week period, the number of new listings dropped 4% year over year, despite the Easter slowdown at this time in 2021, and the overall number of active listings were down 22% from a year ago. However, the report noted that the number of active listings is slowing rising from the all-time low seen in February of this year.
Reflecting these tight market conditions is the share of homes that had an accepted offer within two weeks of hitting the market rising to 59%, up from 55% a year ago. In addition, the share of homes that had an accepted offer within one week of hitting the market was at 45%, up from 42% a year ago. Overall, the median days on market during this period was 19 days.
“Usually April is when the spring homebuying and selling market begins to heat up, but this year things are cooling down a bit instead,” Dee Heyerdahl, a Seattle-based Redfin agent said in a statement. “Potential sellers are deciding to hold off in the midst of the market uncertainty. Homebuyers are telling us that they’re disengaging from the market because they’ve been priced out of the market by both rapidly rising home prices and rapidly rising mortgage rates. That said, the market still feels very hot, and as things slow down it just means homes might only sell for a few thousand over asking price instead of hundreds of thousands and multiple offers will mean three or four instead of 30 or 40.”