In recent months, the housing market has witnessed significant fluctuations. That trend has significantly changed the balance of power between buyers and sellers. As our recession report authors perennially remind us, high housing costs and sticky mortgage rates are key drivers of this slowdown. For Daryl Fairweather, chief economist at housing brokerage Redfin, the new market reality isn’t just about affordability. “I would argue that’s not the only fair-weather-come story about mortgage rates and affordability,” Fairweather said.
That’s more than a quarter of all home sellers on Zillow who cut their expected sale prices in June. This emerging trend only adds to the hurdles sellers are facing in the current market. As of this writing, the average interest rate on a 30-year fixed mortgage is 6.58%. This new 7.92 percent rate is the lowest we’ve experienced in ten months, reported Freddie Mac. Even with this modest loosening, buyer sentiment is tempered.
Perhaps most importantly, the broader economic landscape greatly affects buyer hesitancy. A recent round of trade and tariff policies enacted during President Donald Trump’s administration have accelerated that erosion of economic growth. Just last month, a weaker-than-expected jobs report sent immediate fears flying. Today, Americans are worried that the economic slowdown may be deeper than we initially realized.
Cautious Buyers and Market Dynamics
Brock Harris, a local RE/MAX real estate agent, struck an optimistic chord, saying that today’s buyers are much more cautious. It is as if buyers are the most skittish they have been since early days of Covid,” he said. The prevailing economic uncertainty has caused many would-be homebuyers to wait on taking large financial leaps. Sandy McAlpine, another industry expert, explained that many prospective buyers are waiting for the Federal Reserve to lower interest rates before taking action. “People mistakenly believe that the Fed rate cut is when they have to buy,” she told us.
This wait-and-see attitude is evident in market activity. In fact, over 30% of the largest housing markets in the country have seen home prices fall. These prices are down by at least 1% from their recent peaks. Florida is a state particularly burdened by the fixation on rising prices, with all but 15 of the state’s 67 counties seeing annual price declines. Attached to headwinds like high interest rates and prevailing market pressures, home sales across all of South Florida have plummeted.
Sharon Ross, a local real estate agent, supports this finding. She terms it with great sureness, a buyer’s market. Ross has seen a growing trend of cancellations from sellers who are unable to sell at the prices they want. I owned three single-family homes, and each of them withdrew their listings. They weren’t able to strike the deal at the price point they were looking for,” she said.
The Role of Incentives and Market Adjustments
According to Builder, in response to changing market conditions, housing construction firms have started to use sales incentives at a record pace. At the moment, 2/3 of these companies are resorting to these types of strategies to lure customers. This is the biggest share documented since the start of the pandemic. This strategic pivot underscores the need for sellers to get more comfortable with a competitive experience.
Lori Harris, yet another local real estate agent, shared how open houses have changed. In normal times, we would have had standing-room-only open houses and then receive 15 offers. Now, we often still have competitive opens but only receive one bid,” she said. It’s a sign that demand is still strong, but buyer confidence is in the tank.
So according to Redfin Chief Economist Daryl Fairweather, this unexpected flexibility gives buyers more power to negotiate lower prices. Buyers are receiving a once in a lifetime opportunity to negotiate favorable pricing. Of course mortgage rates are much lower than they were earlier this year,” she said. This move towards a buyer’s market is a real opportunity for anyone ready to pick their way through today’s new normal.
Future Outlook and Economic Considerations
Though the housing market is still in a state of flux, their general expertise is cautious but optimistic going forward. Fairweather expects mortgage rates to slowly come down next year, though he cautions that unexpected economic events could change that forecast. Painter confirmed those forecasts, telling us that Redfin expects long-term mortgage rates to keep going down through 2024. She warned that nothing is guaranteed with the unstable economy.
This dramatic increase in median asking rents introduces a new complication to the housing picture. Per Redfin, median asking rent increased 1.7% year-over-year in July, the biggest jump since January 2023. This trend would only increase the burden on prospective buyers to be able to choose. Now they’re left to consider the tradeoffs of buying vs. renting.
In general, the real estate market is experiencing a housing correction, driven largely by rising interest rates and high inflation, as well as a shift in buyer mindset. Even as sellers adjust to this new reality and buyers are still playing it safe, it’s still a rapidly changing landscape.