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There’s a new trend in home sales – dropping prices.
While Redfin is seeing only a small proportion of homes with lower prices since being listed – about 12% according to the online real estate website – it’s up from 9% a year ago, with some of it due to the increase in interest rates.
“Price drops are still rare, but the fact that they are becoming more frequent is one clear sign that the housing market is cooling,” said Redfin Chief Economist Daryl Fairweather. “It goes to show 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,” she added.
The increase in a 30-year fixed mortgage rates, at about 5% recently, is also working against home sellers, said Fairweather.
“Higher mortgage rates are eating into homebuyers’ budgets,” she said. “As the cool down continues to set in, it is important that sellers price their home carefully.”
The longer it takes to sell a house, the more a homeowners’ pricing power is reduced, she added.
“Homes that sit on the market for several days have a scarlet letter that makes them more difficult to sell,” Fairweather said. “Buyers should be wary of bidding significantly over asking on newly listed homes and take a closer look at the homes that have been on the market for more than a week.”