The slowing demand for homes is affecting the balance of power between buyers and sellers, according to two new reports from Redfin.
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More homesellers are dropping prices as bidding wars become less vicious, the latest signs that an ongoing decline in home demand is beginning to wrest the balance of power back from sellers.
Home offers written by Redfin agents faced competition 58 percent of the time in May, down from 61 percent the month before, according to a new report Friday from the Seattle-based national real estate company.
The report marks the fourth consecutive month of competition in decline. It caps off a year of easing that peaked at 69 percent competition rates in May of 2021.
By the end of the year, fewer than half of Redfin homes are expected to be in a bidding war, the company’s economists expect.
“The housing market isn’t crashing, but it is experiencing a hangover as it comes down from an unsustainable high,” Redfin deputy chief economist Taylor Marr said in a separate report released Thursday. “Housing demand has already cooled significantly to the point that the industry has begun facing layoffs.”
Redfin announced on Tuesday it was laying off 8 percent of its employees due to a nationwide decline in home sales. Compass announced a 10 percent reduction in full-time staff on the same day.
Meanwhile, homebuilders have been cutting back on the number of new construction projects they’ve begun in recent months, citing the same market conditions.
Amid all this, home demand remains high compared to historic levels. Realtor.com’s adjusted forecast for 2022 predicts this year will close with the second-highest volume of home sales since 2007.
Still, the speed with which the market is backing off its frenetic 2021 activity levels has everyone — from industry employers to buyers and sellers — approaching the home market differently in recent weeks.
Over the four-week period ending Sunday, 1 in 18 homes for sale had a price drop. That’s not only the highest rate of price drops recorded during the pandemic, but the greatest share since at least 2015, Redfin’s records show.
“This week’s rate hikes will further stretch homebuyers’ budgets to the point that many more may be priced out,” Marr said in the report. “While a lot of home sellers are already dropping their prices, more homeowners will likely decide to stay put now that the mortgage rate on a new home is significantly higher than their current one.”
A measure of tracking requests for home tours and other services provided by Redfin agents was down 14 percent year-over-year. The company uses this as a proxy for homebuyer demand, according to the company.
The number of pending home sales was down 8 percent year-over-year.
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