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SALT LAKE CITY — An increasing number of homes are selling below listing prices as sellers recalibrate their prices to falling buyer demand, according to RE/MAX's August National Housing Report.
Meanwhile, homebuilders are hurting. September marked the ninth straight month that confidence in the housing market has tumbled. Homebuilder sentiment fell 3 points — from 49 in August to 46 this month — in the National Association of Home Builders/Wells Fargo Housing Market Index. A rating below 50 is considered low.
That's compared to a score of 83 in January, before the Federal Reserve began its battle against record inflation rates and has pushed its key borrowing rate to painful heights, which has indirectly pushed mortgages up.
Home builders slash prices: About 24% of builders reported cutting their home prices, which is up 19% from last month, said NAHB Chairman Jerry Konter, a homebuilder and developer from Savannah, Georgia.
It's part of the mounting toll from mortgage rates that topped 6% this month and continue to hover above that threshold, a high not seen since 2008. That, combined with "persistent building material supply chain disruptions and high home prices continue to take a toll on affordability," according to the National Association of Home Builders.
"Buyer traffic is weak in many markets as more consumers remain on the sidelines due to high mortgage rates and home prices that are putting a new home purchase out of financial reach for many households," Konter said.
As homebuilder sentiment continues to tumble, "the housing recession shows no signs of abating as builders continue to grapple" with high construction costs and "aggressive monetary policy from the Federal Reserve," said Robert Dietz, chief economist for the National Association of Home Builders.
"In this soft market, more than half of the builders in our survey reported using incentives to bolster sales, including mortgage rate buydowns, free amenities and price reductions," Dietz said.
Buyers backing off: The higher mortgage rates — now more than double what they were this time last year, at about 2.86% — are no longer masking the cost of today's record-high home prices.
Buyers — either priced out or soured — are increasingly turning their noses away from the market. Nationwide, about 16% of home purchase agreements fell through in July — the highest rate in more than two years, according to Redfin.
Homes are selling below listing price: On average, home sellers accepted offers below their listing prices in August, according to RE/MAX's August National Housing Report of 51 metros across the nation.
In August, the average close-to-list ratio was 99%, meaning homes sold for 1% less than the asking price — down from 101% in July and 104% in April. That helped push August sales 5.3% higher month-over-month, but the median sales price dipped slightly, by 2.4%, to $410,000.
Inventory tightens: As buyers pull back, so do sellers. New listings dropped 12.8% in August from July, and inventory declined 1.4% after four months of double-digit growth, RE/MAX reported.
However, there are still far more homes for sale than 2021 levels — 20% higher than this time last year, according to RE/MAX.
What they're saying: This shows the market is rebalancing slightly more in favor of buyers, according to Nick Bailey, RE/MAX president and CEO.
"Patient buyers were rewarded in August, as prices softened from July. Sales increased as buyers 'bought the dip' — which was not the trend many people were expecting. The activity modestly depleted inventory, although the number of homes for sale remains significantly higher than this time a year ago," Bailey said.
Even though high mortgage rates are taking their toll, the overall number of home sales was up 5.3% compared to July, according to RE/MAX. That's still significantly down, however, by over 20% compared to August of 2021.
This "late-summer burst of activity," Bailey said, "underscores the housing market's resiliency."
"Despite the uptick in interest rates and concerns about the economy, demand remains strong," Bailey said. "We'll see what happens from here, but the August bump in sales was great news for the industry."
