“The picture of a softening housing market is becoming more clear, especially to home sellers who are increasingly turning to price drops as buyers become more cost-conscious under higher mortgage rates,” said Redfin chief economist Daryl Fairweather.
Additionally, existing-home sales declined by 2.4% in April to a seasonally adjusted annual rate of 5.61 million, according to a report by the National Association of Realtors released last Friday.
Though, one factor that could prevent demand from dropping further is declining mortgage rates. U.S. mortgage rates had their biggest weekly decline since April 2020, dropping from 5.25% to 5.10% last week, according to Freddie Mac. That marks the second straight week of declines.
“For now, mortgage rates have stabilized, and I expect prices to do the same. This will remove some uncertainty for buyers,” said Fairweather. “That means that as long as a home is priced conservatively, it still has a good chance of selling quickly.”
Mortgage rates were at stunning lows for months as the Federal Reserve kept its interest rate target at near-zero levels, fueling a smoldering housing market that featured surging prices.
But the Fed increased its interest rate target by a quarter of a percentage point in March and subsequently jacked up rates by a half percentage point earlier this month, causing rates to soar quickly.