U.S. Home Prices Hit Record High Despite More Sellers Cutting Asking Prices

The U.S. housing market presents a conflicting picture in mid-2024: the median home sale price has reached a new record high, yet a growing share of sellers are reducing their asking prices, suggesting a potential softening of sale-price growth in the coming months. This dynamic is fueled by persistently high mortgage rates dampening buyer demand, even as inventory constraints persist. For buyers, this environment creates specific challenges and potential opportunities, particularly for those willing to consider less-competitive properties.

Why Are More Home Sellers Cutting Their Asking Prices?

Recent data indicates that 6.4% of home sellers reduced their asking price during the four weeks ending May 26, the highest level since November 2022. This trend coincides with the median asking price dipping by roughly $3,000 to $416,623, marking the first decline in six months. These shifts are primarily a response to weakened demand. Pending home sales, which are a measure of contracts signed, are down 3.4% year-over-year.

The core issue is affordability. With the weekly average mortgage rate at 6.94%, many buyers are priced out of the market. Furthermore, the age of inventory—the median number of days a listing is active—has increased year-over-year for the first time in eight months, reaching 46 days. This metric indicates that homes are sitting on the market longer, prompting some sellers to adjust their price expectations downward to attract buyers.

How Can Buyers Navigate This Complex Market?

While the median sale price is up 4.3% year-over-year to a record high, buyers are finding a modicum of relief in their monthly payments. The typical monthly housing payment has dropped to $2,812, its lowest point in six weeks, due to the slight pullback in mortgage rates from their recent peak. However, this reprieve may be short-lived.

Based on our experience assessment, successful buyers in this climate are adopting flexible strategies. A Redfin Premier agent in the Bay Area noted, "The market is slower than usual, but well-maintained properties listed for under a million dollars still get multiple offers... My advice for those buyers is to be open-minded."

This can involve:

• Considering single-family homes that are slightly outdated but do not require major renovations.
• Exploring homes in lesser-known, non-trendy neighborhoods where properties may sit longer and face less competition.
• Evaluating condominiums (Condos), which are a type of individually owned unit within a larger building or complex. Condos are relatively less popular currently, and some are selling for under the asking price.

What Does Stale Inventory Mean for the Market?

The growth of "stale" inventory—homes that remain on the market for an extended period—is another signal of a cooling market. Even though new listings are up 7.8% compared to the same time last year, the momentum of this growth has been slowing. This leaves buyers with fewer fresh options than is typical for May.

Sale prices are considered a lagging indicator because they are typically negotiated a month or more before a deal officially closes. Therefore, the current record-high sale prices reflect market conditions from the past, while the increase in price cuts and listing age points to a potential slowdown in future price growth.

In conclusion, the housing market is at an inflection point. Buyers facing intense competition for turn-key homes may find opportunities by expanding their search criteria. Success likely depends on flexibility and a willingness to act strategically when finding a property with less competition. Focusing on homes that have been on the market for several weeks could provide negotiating leverage, as sellers may be more motivated.