Last Updated on June 16, 2022 by Luke Feldbrugge
Rising interest rates and inflation are what’s on everyone’s mind today but quietly unfolding is a welcomed drop in average home price that some market pundits believe could bring some normalization to this hot housing market. It could also signal that this is the very beginning of a buyer’s market.
To be clear, a drop in the average home price is from the record high prices the hot housing market created, thanks to low housing inventory and low-interest rates. House prices have accelerated a record 20.6% growth between March 2021 and March 2022.
That dynamic is changing. According to a recent report by Redfin, about 1 in 5 home sellers in the U.S. lowered their asking prices in May, the highest number to do so since October 2019.
Higher Interest Rates
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 5.30 percent from 5.20 percent, according to the Mortgage Bankers Association. These higher interest rates have caused some buyers to pull back, which has some sellers scrambling to find purchasers at the higher purchasing cost.
Fewer Bidding Wars
At the end of May new listings climbed nearly twice as fast as they did at this time last year, and the share of listings with a price drop rose to its highest level in two and a half years. Experts predict fewer bidding wars and less outrageous offers over asking prices, which could also keep prices in check.
Where is the Average Home Price Falling the Most?
Realtor.com found home prices are falling in many Rust Belt communities because prices grew too out of whack with what locals could afford. In other cases the lower prices are due to fewer larger homes, which generally fetch higher prices, going up for sale. You can check out which cities experienced the biggest drop in prices here.
Softening of Home Prices Good News for Buyers
A softening in home prices is likely very welcomed if you are in the market for a new home. Still even with the slight decline in prices and slow down in competition, rising interest rates still make it a tough environment to buy a home. If you are in the market to buy a home this summer, shopping for the best mortgage rate is a great place to start maximizing your spending power.
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Finding an affordable place to live in the cities where community heroes work is an ever-increasing struggle for not only police officers, but also other public servants like firefighters, emergency medical service members, dispatchers, nurses, doctors and teachers. Heroes looking to tap into the housing markets should know that resources are available, but be sure any housing counseling you seek is from a trusted Homes for Heroes local specialist or an agency that’s approved by the Department of Housing and Urban Development (you can find your state’s accredited counselors by using this interactive map).
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Homes for Heroes, the nation’s largest hero savings program, offers savings to firefighters, law enforcement, emergency medical services, military (active and veterans), healthcare workers and teachers when they buy, sell or refinance a home. When you work with a Homes for Heroes real estate and mortgage specialist, heroes receive an average of $2,400 in Hero Rewards savings after closing on a home or mortgage with Homes for Heroes specialists. Sign up to talk to a Homes for Heroes real estate specialist today.