Market Momentum Shifts: How to Leverage Softening Home Prices

Home prices are on the downswing, but weakness in the real estate market could allow buyers to double-dip and negotiate an even lower price.

Daryl Fairweather, Redfin's chief economist, recently reported that homes sold on average for the four weeks ending June 30th were just 0.3% below the listing price. According to the report, houses were sold at a discount for the first time since 2020 in June 2024.

Additionally, homes are taking longer to sell; the median number of days on the market has increased to 32, up 5 days from the previous year.

These figures clearly show that housing demand is softening. Sellers are forced to be less aggressive with their prices due to the current circumstances.

Homes are taking longer to sell: A Favorable Condition for Buyers!

Homes for sale are available to buyers at less than the asking price, which is a massive milestone for many aspiring buyers who’ve been irritated by rising home prices in the past few years. However, it's likely just a temporary adjustment in a market that still benefits sellers overall.

Housing demand continues to surpass supply, which has spurred U.S. home sale prices up 4.9% in the previous year and a rise in median price to $397,954.

However, demand has also been pulled back in recent weeks, affected by rising mortgage rates (nearly around 7% mortgage rates) and relatively low inventory than the pre-pandemic period.

In this situation, buyers are struggling because they simply cannot find properties at a justified price, given higher borrowing costs. That helps explain why three out of every five homes on the market in May were tagged as stale — they were listed for a month without entering into a contract, according to Redfin data.

The question now is whether this will continue. The Federal Reserve will reportedly announce cuts in the federal fund rates, which might result in lower mortgage rates before year-end.

Since higher-than-expected mortgage rates have pushed so many potential buyers out of the market, reduced rates would bring more people back into homeownership. This would boost demand and likely drive up prices.

Take Advantage of Stale Real Estate Listing

Homebuyers can take advantage of homes that have been on the market for a while, as these properties are often more open to negotiations. Buyers might successfully offer about 5% less than the asking price.

If a home has been listed for two weeks or more without any offers, the seller is likely feeling some pressure and may be more willing to consider a lower offer.

However, market conditions vary. In areas like the San Francisco Bay Area, it's rare for homes to sell below the asking price. In contrast, in markets like Florida, sellers often start with higher asking prices and then accept lower offers.

If a 5% difference in price is a significant concern, buyers might need to rethink whether they can truly afford the home. It's wise to have a financial cushion to cover unexpected costs associated with homeownership.