Headlines Are Making You Think Home Prices Are Declining

If you’ve seen the news lately about home sellers slashing prices, you might feel more alarmed than informed. Here’s a clearer picture of what’s really happening with home prices—and yes, it does have to do with who the seller hires to sell their home!

While it's true that headlines like “Price Drops Hit Highest Level in 18 Months As High Rates Dampen Buyer Demand” from Redfin might suggest prices are falling, the reality is a bit different.

Home prices are actually higher than they were a year ago and are expected to keep rising, albeit at a slower pace.

A recent report from Realtor.com indicates that 16.6% of homes on the market had price reductions in May, compared to 12.7% last May. However, this does not mean that overall home prices are falling.

Understanding Asking Price vs. Sold Price:  

The asking price, or listing price, is the amount a seller hopes to get for their home. However, today’s buyers are savvy and cautious, especially with higher mortgage rates straining their budgets. If a home isn't attracting much interest, sellers may need to adjust their asking price, leading to price reductions.

If a seller hires someone who simply agrees with them rather than a strategic professional skilled in pricing and marketing, unfortunately they are more likely to experience a longer and more challenging selling process.

In contrast, the final sold price is the actual amount a buyer pays when the transaction is complete. It's important to note that actual sold prices are still rising and are expected to continue to do so for at least the next five years.

What Does This Mean for Home Prices?  

The increase in price reductions indicates a moderating demand, prompting sellers to adjust their expectations. Despite these adjustments, home values are still growing annually. According to the Federal Housing Finance Agency (FHFA), home prices increased by 6.6% over the last year. 

This map illustrates how home prices have risen almost everywhere in the country, indicating that the market is not in decline.

While price reductions from sellers might suggest that prices could moderate in the coming months, this is an expected adjustment rather than a cause for alarm. The same article from Redfin also notes:

". . .those metrics suggest sale-price growth could soften in the coming months as persistently high mortgage rates turn off homebuyers. For now, the median-home sale price is up 4.3% year over year to another record high. . ."

With inventory as tight as it is today, price moderation is much more likely in the upcoming months than price declines.

Why This Is Good News for Buyers and Sellers

For Buyers: More realistic asking prices mean a better chance of securing a home at a fair price. It also means entering the market with more confidence, knowing prices are stabilizing rather than continuing to skyrocket.

For Sellers: Understanding the need to adjust your asking price can lead to faster sales and fewer price negotiations. Setting a realistic price from the start can attract more serious buyers and lead to smoother transactions.

Bottom Line

While the increase in price reductions might seem troubling, it’s not a cause for concern. It reflects a market adjusting to new conditions. Home prices are continuing to grow, just at a more moderate pace.

This is why choosing the right agent to help sell your home is crucial. To avoid sitting on the market and facing multiple price reductions, you need an agent who specializes in listing homes and can set realistic expectations based on the current market. This practical approach will help save time and prevent numerous price adjustments. If you've been considering selling your home, let's chat. We can discuss exactly what to expect for your home in today's market! 

Data Resource:  2024 - Keeping Current Matters