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A significant and growing share of U.S. home sellers are reducing their asking prices, signaling a shift from the intensely competitive housing market of early 2022. As of early April, 12% of homes for sale had a price drop within a four-week period—the highest level since the previous December. This trend, coupled with rising mortgage rates approaching 5%, indicates that seller dominance is softening, creating a more balanced environment. While the market remains fast-paced, buyers are gaining slightly more negotiating power as higher monthly mortgage payments strain their budgets.
The primary driver behind the increase in price reductions is the rapid rise in mortgage rates. According to recent data, the monthly mortgage payment for a median-priced home has surged by 32% year-over-year. This sharp increase is directly impacting how much home buyers can afford, forcing them to be more selective. As Redfin's Chief Economist noted, "There is a limit to sellers’ power... higher mortgage rates are eating into homebuyers’ budgets." Sellers who overprice their homes are now more likely to see their properties sit on the market, which can stigmatize the listing and lead to a price drop later.
| Market Indicator (4-Week Period Ending April 3) | Year-over-Year Change |
|---|---|
| Median Home Sale Price | +16% to $384,500 |
| Median Monthly Mortgage Payment | +32% to $2,245 |
| Homes Sold Above List Price | 52% (up from 41%) |
| Price Drops (4-Week Rate) | 12% (up from 9%) |
Despite the cooling trend, the market remains highly competitive by historical standards. Key metrics show that homes are selling faster than ever. For example, 45% of homes under contract had an accepted offer within just one week of being listed. The average sale-to-list price ratio also remains above 100%, meaning the typical home sells for about 2.1% above its asking price. However, early indicators of buyer demand, such as mortgage purchase applications and home tours, are softening, especially in expensive coastal markets. This suggests that the frenzy is easing, not collapsing.
For buyers, this environment presents both challenges and opportunities. The challenge is affordability: with higher home prices and mortgage rates, your purchasing power is significantly reduced. The opportunity lies in a slightly less frantic pace. Buyers should be wary of bidding significantly over asking price on newly listed homes. Instead, consider properties that have been on the market for more than a week, as these sellers may be more motivated to negotiate. It is crucial to get pre-approved for a mortgage to understand your exact budget before you start shopping.
Sellers must adjust their strategies to succeed in this shifting market. Pricing your home correctly from the first day it is listed is more critical than ever. An overpriced home that lingers on the market can develop a "scarlet letter," making it harder to sell later, even after a price reduction. Based on our experience assessment, sellers need to work closely with their real estate agent to analyze recent comparable sales and price their home competitively to attract serious offers quickly. While you may not receive 30 competing bids, a well-priced home in a desirable location can still sell quickly and for a strong price.
The key takeaway is that the U.S. housing market is entering a new phase of moderation. While it is still a seller's market, the balance of power is incrementally shifting. Buyers should focus on affordability and be strategic with offers, while sellers must prioritize accurate initial pricing to avoid the growing trend of price drops.
