New housing data show the market is starting to tip back in favor of buyers, including people who are looking for their first home, experts say.
New home sales just saw their slowest month in more than six years, the U.S. Census Bureau said Tuesday. Meanwhile, existing home sales in July fell for the sixth-consecutive month to their second-lowest point since the start of the pandemic, the National Association of Realtors (NAR) said last week.
And while the median sales price for an existing home climbed 10.8% from one year ago to $403,800 in July, it was down $10,000 from the previous month’s record high of $413,800, the NAR said.
That's the first monthly decrease since December 2021.
Price cuts were particularly substantial in pandemic home-buying boomtowns like Boise, Idaho; Salt Lake City; and Sacramento, California, the housing group Redfin reported Monday — although some of that decline was tied to some buyers backing out of the market.
Still, an opportunity may now be opening up for other buyers.
“Home sales may soon stabilize since mortgage rates have fallen to near 5%, thereby giving an additional boost of purchasing power to home buyers," said NAR chief economist Lawrence Yun in a release.
Rising mortgage rates, fueled by the Federal Reserve's decision to gradually increase its key interest rate this year, have put an end to the era of frenzied bidding wars, though at the cost of excluding some buyers from the market, said Mike Simonsen, CEO of Altos Research, a real estate market data company.
"The good news for buyers right now is that there’s a lot less competition than there was six months ago," he said. "So if you find a home you like that you can afford, you don’t have to worry about competing with 50 other offers to get it."
Mortgage rates have climbed during the pandemic from roughly 3% to more than 5%, increasing the typical monthly mortgage payment by about $500, said Mike Fratantoni, chief economist and senior vice president at the Mortgage Bankers Association.
But he estimates mortgage rates likely peaked in June, and that a market shift is now underway.
"I think we're absolutely moving from a world where it was an incredible seller's market and everything was selling quickly and well above list price, to now back to a more typical situation where a buyer has some leverage," Fratantoni said.
Inventory is notably increasing for those seeking "move-up" homes, Fratantoni said. As those move-up buyers move out, their former homes will become available to first-time buyers, who have been hit hardest by the pandemic-related run-up in housing costs.
For anyone in the market right now, Fratantoni said, the cooldown in buying activity means there's less of a worry about missing out on the home you want.
"They'll have days to consider putting in an offer as opposed to hours," he said. "There's definitely a change in tone."