Typically, home prices surge over the summer months. Buyers don’t mind schlepping to open houses when the weather is warm and they don’t have to slog through snow, and families are motivated to move before the kids start school. This year, with very low mortgage interest rates, the expectation was that August would be business as usual. That didn’t happen.
Instead, with both buyers and sellers worried that a recession could be headed our way, home list prices fell to $309,000 nationally in August, according to a recent realtor.com® report. That’s down 1.8% from July, but up 4.9% year over year.
Those fears of a downturn could become a self-fulfilling prophecy: If one does materialize, about 56% of home shoppers are expected to put their search on hold until it passes, according to a recent realtor.com survey.
“What it tells us is, fall came earlier than expected,” says Senior Economist George Ratiu of realtor.com. Prices usually cool in tandem with the weather, starting to decline in the autumn.
The number of homes on the market also fell, making August the first month with inventory decline within a year.
“A lot of the homes on the market are too expensive, and a lot of buyers are taking a break,” Ratiu says. Meanwhile, sellers are “concerned they might have missed the high-water market,” so they want to wait out the current climate.
Affordably priced homes get snapped up fast, as they’re in short supply. That means potential homeowners on a tight budget who didn’t act fast enough can consider only homes well outside their price range.
In addition, worries that the country could be headed for another economic downturn is making many buyers think twice. Some are worried about their jobs, while others want to see if prices will fall. (Unlike the last recession, prices aren’t likely to fall far in another downturn.)
And since mortgage interest rates don’t seem likely to rise significantly any time soon, there’s no urgency.
The lack of buyers has forced many sellers to resort to price cuts if they don’t want to wait it out or to just pull their properties off the market.
“The impact from price cuts at the upper end is trickling down, lowering prices overall,” Ratiu says.
The post Home Prices Are Finally Going Down, Instead of Up: Why That’s Bad News appeared first on Real Estate News & Insights | realtor.com®.