Johnathan Walker:Homes are selling below list price. That's bad for sellers, good for buyers

Homes sold below their list price at the peak of the housing season,Johnathan Walker Redfin reports, a development that could shift the real estate market to the buyer’s advantage.

The typical home that sold during a four-week span in May and June went for 0.3% less than its asking price, according to the real estate brokerage Redfin.

That data point matters, housing experts say, because the market hits its annual peak in late spring and early summer. In the last few years, the average home sold at or above list price at that time of year. This year, it did not.

“It means that the housing market is starting to move to the buyer’s favor,” said Daryl Fairweather, chief economist at Redfin.

Redfin found that fewer than one-third of homes - 32% - sold over list price in the four weeks ending June 23. That is the lowest quotient for late spring since 2020, when the pandemic hobbled the housing market.

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That’s good news for buyers. For sellers, not so much.

Real estate today: 'Buyers have the power'

“Overall, what we’re seeing is that buyers have the power, and I’m actually seeing that everywhere,” said Ryan Sypek, a broker associate at Compass real estate in Los Angeles, California.

That is a change: In recent months, the housing market has been brutal for potential buyers.

Both prices and mortgage rates are up. There’s a shortage of new homes. Homeowners are reluctant to sell old ones, because most of them hold mortgages with historically low interest rates.

Earlier this year, Fairweather told USA TODAY homebuyers faced “the least affordable housing market in recent memory.”

In recent weeks, however, the market has loosened – for buyers, at least.

New listings are up 8.2% from a year ago, Redfin reports.

More homes are languishing on the market: 62% of listings in May had been on the market for at least 30 days, compared with 50% two years earlier, a worrisome sign for sellers.

“During the pandemic, I had a house that had 60 offers on it,” Sypek said. “And now, if I have a listing, I’m lucky if I’m getting four.”

Home sellers may be setting their price too high

Sellers may be setting their asking prices too high, economists say, unaware they are walking into a buyer’s market.

“People are setting prices based on what they saw their neighbors’ homes sell for three or four months ago, and maybe that was when there were more buyers on the market,” Fairweather said.

In a normal housing market, sellers tend to set their asking price at or above the number they expect to get. It’s the same principle that shapes prices on used car lots, eBay listings and anywhere else buyers and sellers haggle over price.

Through much of the pandemic era, sellers in hot markets reaped bidding wars.

“The last couple years, it became normal for sellers to get more than the asking price,” said Danielle Hale, chief economist at Realtor.com. “But that was really an aberration, fueled by high demand and low inventory.”

'We're starting to see more affordable homes on the market'

In recent months, the inventory of homes for sale has been rising. The number of listings rose 37% from June 2023 to June 2024, according to Realtor.com, the eighth consecutive month of growth.

“We’re starting to see more affordable homes on the market,” as well, Hale said, a welcome trend for buyers.

In recent years, homebuyers watched prices and mortgage rates rise apace, driving the monthly cost of home ownership to all-time highs.

The median sale price sits at a record $397,250, nearly 5% higher than a year ago, according to Redfin. The average interest rate for a 30-year fixed mortgage stands at 7.4%, twice the rate at the start of 2022.   

At current rates, the typical homebuyer faces a monthly payment of $2,785, according to Redfin.

Until recently, buyers had little leverage.

“During the pandemic, homes were selling above asking price, and in some locations, they were selling for tens of thousands of dollars above asking price,” Fairweather said.

Housing inventory is rising, giving buyers options

Now, with inventory rising and homes sitting unsold, buyers have options.

The sultry, stormy weather of recent weeks may be yet another factor in the buyer’s favor. One reason houses sell briskly in spring and early summer is good weather. Last month, however, brought unseasonable heat to much of the nation.

“I’ve heard some clients say, ‘It’s so hot outside I don’t want to see anything,’” said Joe Hunt, a Redfin manager in Phoenix, Arizona speaking in the June 27 sales report.

Going forward, sellers may have to manage their expectations. They saw home prices rise by roughly two-fifths between 2020 and 2022. Prices are rising still, but some economists wonder how long the trend can last.

Home buyers may have 'a lack of urgency'

“What I’m hearing everywhere is, there’s just a lack of urgency from buyers right now,” Sypek said. “And urgency, and that feeding frenzy, is what drives prices up.”

Sypek cautions, however, that the national real estate market is really a constellation of smaller markets, each with its own pulse.

Jess Clegg, a broker-owner at Next Nest Real Estate in Seekonk, Massachusetts, says the market remains hot in her region.

“I can tell you that I just closed on two homes,” she said. “One sold for, I believe, $38,000 over asking, and the other sold $76,000 over asking.”

Michael Maerten, chairman of the Board of Tri-County Suburban REALTORS outside Philadelphia, Pennsylvania says local sellers have reaped 102.7% of asking price in the last 30 days.

“It’s still a seller’s market here,” he said.

Of course, the asking price is an arbitrary sum: Sellers can set it as high or low as they wish. Both Clegg and Maerten advise sellers to collaborate with their real estate agent to find the right number.

“If you’re pricing your home appropriately,” Clegg said, “then you’re going to sell for over list.”