More home sellers drop asking price as housing market slows

Home sellers are getting nervous, as the housing market cools quickly.

According to Realtor.com, one in five sellers in August lowered their asking price. A year ago that percentage was only 11%.

The average home sold below list price for the first time in more than 17 months during the four-week period ending August 28, according to a report by Redfin.

Homes simply aren’t selling at the rapid pace they did six months ago, when strong demand rallied against a lack of supply, bidding wars were the norm, and a seller could often get a contract signed within the course of the weekend. Homes on the market in August stayed on average five days longer than they did a year ago — the first annual increase in time on the market in more than two years.

The supply of homes for sale is also rapidly rising, up nearly 27% from a year ago, even as fewer sellers have decided to list. Pending sales in July, which represent contracts signed on existing homes and are the most recent sales data available, were about 20% lower than July 2021, according to the National Association of Realtors.

“For many buyers today, the sharp rise in options for homes for sale removes the sense of urgency they have felt over the past two years, when inventory was scarce,” said Danielle Hill, chief economist at Realtor.com. “As a result of this shift, along with rising mortgage rates, competition continued to subside in August, with the inclusion of price trends indicating that home shoppers are tightening their financial constraints.”

The average listing price in August fell to $435,000 from $449,000 in July, according to Realtor.com.

Mortgage rates have been on the rise since January, hitting a recent high in June and then declining slightly in July and most of August. However, it is rising again and is now approaching its highest level in June.

Redfin reported that requests for home tours and other home-buying services from its agents at the end of August were down 16% from the same period a year earlier. Tour activity is also down 9% from the start of the year, compared to an 11% increase at the same time last year, according to home tour tech company ShowTime.

“The slowdown after Labor Day is likely to be a little more severe this year than in previous years when the market was very tight,” said Daryl Fairweather, chief economist at Redfin. “Expect homes to stay on the market, which could lead to another slight increase in the share of sellers lowering their prices.”