The average U.S. selling price of a home in February was $386,721, 1.2 percent lower than a year earlier, online brokerage Redfin reported.
It was the first time in almost 11 years that the average selling price now was lower than it was a year previous.
Higher interest rates discouraged buyers and forced sellers to ask less for their homes, Redfin noted.
In February, 14.2 percent of homes sold were bought only after the seller had cut the asking price, according to Redfin. In February 2022, only 5.7 percent needed to shave the price to sell a home.
However, the banking industry’s current crisis seems to be working in buyers’ favor.
The average national interest rate for a fixed-rate, 30-year mortgage has fallen from 6.88 percent in late February to 6.55 percent on 16 March, according to Redfin.
“Ongoing turmoil in the banking sector lowered the likelihood of the Federal Reserve hiking interest rates much more this year,” Redfin said in its report on February’s housing market.
“That caused mortgage rates to drop, which brought more homebuyers back to the market,” it noted.
Applications for mortgages to buy a new home increased by 6.5 percent last week, the Mortgage Bankers Association reported.
“We had expected mortgage rates to come down to the lower range of 6 percent sometime in the second half of 2023,” Nadia Evangelou, senior economist at the National Association of Realtors, wrote in a note.
“Now we may see that level in the coming weeks,” she said.
TREND FORECAST: Declining mortgage rates indeed will draw more homebuyers into the market.
However, the banking crisis will not persuade banks to lower their lending standards; if anything, lenders might be even more cautious about who they decide to lend money to.
Although lower home prices are good for the economy in general, they are unlikely to spark a boom in home sales, especially with many owners continuing to sit pat until interest rates level off or begin to decline.
If the U.S. stock market crashes, the housing market will fall with it. But again, we have forecast a housing price correction, not a housing bust.
TREND FORECAST: Confirming our trend forecast of a housing correction is sales and prices, today the National Association of Realtors reported that in February, sales of previously owned homes rose 14.5 percent compared with January.
While racking up the largest price increase since July 2020 when the housing market started to boom with record low-interest rates to fight the COVID War, compared to last February, sales are down 22.6 percent.