‘There May Be a Limit to Sellers’ Power’
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April 8, 2022
Moving into the spring buying season, the number of new listings is picking up. Last week, the number of new listings rose by 8% compared to a year ago, according to realtor.com® data. But even with the climb, housing shortages abound: Active inventory remains down 13% compared to a year ago.
With home prices and mortgage rates climbing over recent weeks, more aspiring home buyers are becoming priced out. Sellers may be taking notice. About 12% of homes for sale had a price drop during the four weeks ending April 3, according to a recent report from Redfin. That is up from 9% a year earlier.
The number of price drops is also growing faster this time of year than it has since at least 2015, Redfin notes. Typically, that number is usually flat month over month during this time of year.
“Price drops are still rare, but the fact that they are becoming more frequent is one clear sign that the housing market is cooling,” says Daryl Fairweather, Redfin’s chief economist. “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.”
Sellers may not be able to use a “the sky is the limit” pricing strategy this spring as buyers face higher prices from rising mortgage rates as well. But sellers will still likely profit from their homes. The average sales-to-list price ratio, which measures how closely homes are selling to their asking price, increased to 102.1%, according to Redfin. In other words, the average home sold for 2.1% above its asking price.
Source: “Housing Market Update: Share of Sellers Dropping Their Asking Price Climbs Past Last Year’s Rate,” Redfin (April 7, 2022) and “Rising Mortgage Rates Are Causing More Home Sellers to Lower Their Asking Prices,” CNBC (April 7, 2022)