There are signs that the Federal Reserve's interest hike campaign is beginning to force the U.S. housing market to cool off, a little.
But while some argue that the unfettered home price growth we've been seeing in the last few years must come to a head, others point to historically low inventory as a sign that any correction will be offset by continued high demand.
Still, the indications coming out of many cities point to the fact that many markets are seeing the slightest drops in demand.
Are Home Prices Truly Going Down?
According to the latest market report from real estate brokerage Redfin (RDFN) - Get Redfin Corporation Report, 19.1% of those selling their homes dropped their asking price in the four weeks ending on May 22. That's the highest number of price cuts since October 2019.
"The picture of a softening housing market is becoming more clear, especially to home sellers who are increasingly turning to price drops as buyers become more cost-conscious under higher mortgage rates," Daryl Fairweather, Redfin's chief economist, said in a statement. "For now, mortgage rates have stabilized, and I expect prices to do the same."
Other indications of slowing demand include a decline in the number of people searching for available homes on the market. Searches of "homes for sale" are down 13% from the same time in 2021.
Home tour technology company ShowingTime found that touring activity was also down 29% from January through May 22 while home listing times, weekly pending sales and and the share of homes sold above listing price all stabilized after spiking for months.
While 30-year mortgage rates dropped slightly to 5.1% in the week ending on May 26, mortgage rates are still near their highest levels in many years.
Mortgage purchase applications are down 16% from 2021. The average mortgage payment is a near-record high of $2,425. When interest rates were at 2.95% a year ago, the average family was paying only $1,708.
Can I Finally Buy That House?
These price dips are best viewed as a correction from astronomical growth rather than a trend downward.
According to Redfin, the median price of a home for sale is still up 16% from 2021 to a record $400,000. Newly-listed homes are at an even higher $418,000.
In some Western cities, the price of a home is so disproportionate to average incomes that people would need to save for several decades to have enough just for a down payment.
With demand far outstripping available homes on the market, many with a mind to sell their home have been holding off on listing it in the hopes that they can see its value grow even further.
Current home sale trends indicate that the period of "anything goes" may be coming to an end as some markets correct themselves to be more proportional with actual demand.
But in most places, it is still very high and a return to "affordability" is also not imminent. In one year, the average time a house spends on the market dropped from 19 to 15 days. The number of homes selling above listing price is, at 57%, also 7% higher than it was a year ago.
"As long as a home is priced conservatively, it still has a good chance of selling quickly," Fairweather said.