Home sales are slowing, fewer buyers are seeking mortgages, and bidding wars appear to be cooling in response to a series of interest rate hikes initiated by the Fed’s aggressive inflation control methods, leading some experts to believe that a housing correction is underway. Median home list prices across the U.S. reached a record high $425,000 in April, a 14.2% year-over-year increase accompanied by a 75% jump in average mortgage interest rates, which climbed to 5.25% during the week ending May 19, according to Realtor.com.
That costly duo is causing a growing number of buyers to reconsider their purchasing decisions, and a subsequent drop in demand is slowly leading to price corrections after years of waning affordability. Still, median list prices are likely to remain elevated for the foreseeable future as the market eases into an adjustment period.
“There’s no way that enormous jump in housing costs isn’t going to affect buyer demand,” says Patrick Carlisle, chief market analyst in the San Francisco Bay Area for the real estate brokerage Compass. “It’s also coupled with the highest prices in history. That can’t not have an impact.”
“The market is definitely shifting and becoming cooler, and that’s becoming clearer day by day,” says Carlisle. “There are fewer buyers at open houses, there are fewer offers on new listings, and sometimes no offers. Price reductions are just beginning to creep up.”