Home sellers have been reducing their listing prices more rapidly than at any point in the past nine years. Buyers are responding by making more offers. Yet mortgage rates near 6.5% keep monthly payments high.
Danielle Hale, chief economist at Realtor.com, said sellers are being realistic from the start. "Sellers are reading market conditions and are pricing accordingly from the start rather than listing high and cutting later, and buyers are taking note and making bids."
In June, the average interest rate for a 30-year fixed mortgage came in at 6.49%, a drop from 6.82% a year ago. That lower rate saves a buyer with 20% down about $132 per month on a typical home - roughly $1,500 annually.
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But the typical home still sat on the market for 53 days, unchanged from last year. The proportion of homes that had their asking prices reduced dropped by 1.9 percentage points to 18.8%, indicating that sellers are setting appropriate prices initially.
New listings rose 2.4% year over year, adding more supply. Jake Krimmel, senior economist at Realtor.com, called it a "no-news-is-good-news June."
The housing market has been in a gradual recalibration since the Federal Reserve's rate hikes began. While lower asking prices and slightly lower mortgage rates have improved affordability compared to a year ago, monthly payments remain elevated relative to historical norms. This combination of factors points to a market slowly finding equilibrium, with both sides adjusting expectations after the pandemic-era boom.
The current market contrasts sharply with the pandemic-era frenzy, when bidding wars and double-digit price increases were common. While prices have come down from their peaks, they remain significantly higher than in 2019, keeping homeownership out of reach for many. The Federal Reserve's aggressive rate hikes from 2022 onward have reset expectations, pushing monthly mortgage payments to levels that strain household budgets even with lower asking prices.
Despite the record price decline, home prices remain well above pre-pandemic levels, and affordability challenges persist for many first-time buyers. The market's slow recalibration is likely to continue as long as rates stay elevated.
"Unlike last year, sellers are willing to take a slight haircut to move, and buyers get a little relief on price to offset rates that settled higher than hoped," Krimmel said. The combination of lower asking prices and steady mortgage rates is drawing more buyers into the market.
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