As housing market cools, homebuyers regain leverage

LOS ANGELES (AP) — Years of soaring home prices and sharply higher mortgage rates remain hurdles for many would-be homebuyers, but new data shows that they’re regaining some leverage at the negotiating table as the housing market slows.

An analysis of home sales data by Redfin shows that, on average, U.S. homes purchased during a four-week period in August sold for less than what sellers were asking. That hasn’t happened since at least March 2021, according to the real estate brokerage.

“The only times you get homes going above list price is when there’s a bidding war, and those used to not be a regular occurrence,” said Daryl Fairweather, Redfin’s chief economist. “And we’re back to a place where bidding wars are unusual, not the norm.”

The average sale-to-list price ratio, a measure of how closely homes are selling to their asking prices, fell to 99.8% in the four weeks that ended August 28, Redfin said. The ratio was 101.4% in the same stretch last year. Ratios above 100% indicate homes on average are selling at or above their asking price.

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For most of last year and this year, fierce competition for relatively few homes on the market and rock-bottom interest rates fueled bidding wars that often led to homes selling for well above their list price.

That remained the prevailing trend until recently, even though the housing market has cooled significantly since the spring as mortgage rates surged sharply above where they were last year. Higher mortgage rates make homes less affordable, thinning out the pool of home hunters, which leaves sellers with less leverage when negotiating with buyers.

On average, 7.5% of homes for sale in the four weeks in August that Redfin tracked had a price drop each week, a record high, the company said.