Home prices are getting slashed at an unusual pace, thanks to a recent surge in inventory and still-high mortgage rates pushing sellers to compete for buyers, according to Zillow economists.
The share of listings on the market that saw a price cut in November was 22.6%, down slightly from October’s 25% rate but still abnormally high for this time of year, the real estate listings site said in its monthly housing market update on Monday.
“Price cuts are more common than normal – chances are good that prices are negotiable,” Zillow said.
The trend likely reflects sellers trying to attract buyers, who had largely been shut out of the housing market as mortgage rates soared.
While the 30-year fixed rate has tumbled from 8% in October, it still dwarfs the cost of borrowing that buyers faced in 2021, when the rate hovered between 2%-3%.
“But rates still higher than 7% continue to hamper demand and help push home values down,” Zillow said. “Sellers are responding to affordability challenges as well by cutting list prices.”
Meanwhile, inventory has ticked higher in over the past month, which has also helped improve housing affordability. High mortgage rates made sellers hesitant the past year to list their homes for sale. But listings on the market jumped 3.1% year-per-year in November, despite mortgage rates remaining elevated.
Experts are growing more optimistic that housing affordability conditions will continue to improve in 2024, particularly as interest rates in the economy look poised to pull back.
Home-buying costs are set to level off next year as mortgage rates continue to ease, Zillow said in its 2024 market outlook. Home prices, meanwhile, are set to fall by 1%, according to a recent Redfin report.
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