Home Prices Cool as Active Listings Surge by 35%

The heat in the housing market is beginning to wane, with home prices showing signs of cooling despite still being higher than last year. New reports indicate shrinking price gains and a shift in seller behavior after a stagnant spring market.

Shrinking Price Gains

For the first time since the COVID-19 pandemic began, homes sold for slightly less than their asking prices, with a 0.3% dip during the four weeks ending June 23, according to Redfin. “A year ago, homes were selling at list price, and two years ago, they were selling about 2% above list price,” reported Redfin. This marks a significant change in the housing market dynamics, suggesting a cooling trend rather than a crash.

Mortgage Rates and Market Impact

Despite this cooling, mortgage rates have remained stubbornly high. According to Mortgage News Daily, the average rate on a 30-year fixed mortgage has hovered just above 7% for three consecutive months. High mortgage rates continue to impact buyer affordability and market activity, contributing to the cooling effect.

Price Trends and Income Disparities

The S&P Case-Shiller index highlighted a 6.3% increase in home prices from April 2023 to April 2024, with May continuing this trend. Home prices are now 47% higher than in early 2020, with the median sale price reaching five times the median household income. Despite rising prices, the growth rate has slowed. ICE Mortgage Technology’s upcoming data reveals a drop in annual home price growth to 4.6% in May from 5.3% in April, marking the slowest growth rate in seven months.

Increasing Supply

The supply of homes is on the rise, with total active listings up by 35% compared to last year, according to Realtor.com. However, inventory levels remain more than 30% below pre-pandemic norms. “Some buyers think they can get a deal because they’re hearing the market is cool, and some sellers think every home will sell for top dollar no matter the condition,” said Marije Kruythoff, a Los Angeles Redfin agent. “In reality, everything depends on the house and the location.”

As the housing market adjusts, buyers and sellers must manage their expectations. With rising inventories and cooling prices, the market is entering a new phase where carefully considering each property’s unique characteristics will be crucial. While the frenzy of the past few years may be slowing, the market remains dynamic and responsive to various economic factors.