Homes selling below list price as mortgage rates surge

DELMARVA – Homes in the United States are selling below asking price for the first time in about a year and half, according to online brokerage firm Redfin.

Redfin is reporting that’s largely due in part to surging mortgage rates, which have made many sellers accept lower prices. According to Redfin, the average sale-to-list price ratio dropped 99.8% between July 28th, 2022 and August 28th, 2022. The last time that ratio was below 100% was in March 2021.

While the amount of homes for sale spiked in a record rate in July, sales of new homes dipped to the lowest rate since 2016. This, as mortgage rates hit record numbers since June and the Federal Reserve teases more rate hikes.

Keller Williams Certified Realtor Amanda Hall says she thinks the trend is a result of the housing market evening out.

“Things were selling way above market value. So, it just kind of seems like things are closing lower than their listing prices. I think before, they were probably marketed higher,” said Hall. “Now we’re listing homes for what they’re really worth, as opposed to what they weren’t. Supply and demand is still here. Over the past two years, we were seeing unprecedented numbers. We were seeing people just throwing money because we didn’t have as many houses to choose from.”

Hall says the reason why higher mortgage rates can influence selling prices has to do with the buyer’s budget.

“They’ve already done their work. Now they know where they need to be when they’re buying a house in payment. So, when you’re looking at a higher interest rate, you’re looking  at less of an amount that you can pay for your home,” said Hall. “It depends on if you’re buying a $500,000 house. Someone who’s buying a house under $300,000 might be looking at their budget a lot more and seeing what they really can afford.”

For prospective buyers unsure about if now is the time to make the jump, Hall has this advice:

“A higher interest rate might mean that you have to sit out on the sideline and watch it go down a little bit before you can jump in the game again,” said Hall. “If you’re looking at a $250,000 home mortgage, and you’re looking at a 5.5% or 5.75% interest rate, you might want to just watch for a minute and wait, because you can buy a better house with a lower interest rate.”