In just six months, Sam Brinton, a real estate agent in Salt Lake City, has witnessed a complete reversal in buyer sentiment.
“It’s a night and day difference,” he says.
Last year, even as the pandemic housing market pushed home prices ever higher and bidding wars were an expected part of the homebuying process, buyers were motivated enough to stay in the game.
The last few months have been the opposite.
“They are confused and hesitant now. Many buyers are sitting on the sidelines because the market has cooled down so much,” says Brinton.
The cooling housing market has further fueled the demand for rental units, driving rental prices even higher.
Why are people thinking about renting?
It’s been a nerve-wracking time for homebuyers grappling with still-soaring prices for existing homes despite rising inventory, falling home sales and volatile interest rates.
The average 30-year fixed mortgage rate went from 3.22% on Jan. 6 to 5.55% on Aug. 25, according to Freddie Mac.
Existing home sales fell for the sixth consecutive month with sales down 6% from June and 20% from one year ago.
The wait-and-watch approach by buyers is prompting a high share of home sellers to drop their asking price. More than 15% of home sellers dropped their asking price in the 97 largest U.S. metropolitan areas, according to a report from Redfin.
In pandemic boomtowns, it was much more drastic.
In Salt Lake City, for instance, 56% of homes for sale had a price drop in July. Nearly 70% of homes for sale in Boise, Idaho, had a price drop in July, the highest share of the 97 metros.
“Last year, the market forces pushed you into a home and pushed you into doing it sooner than you wanted . It was like ‘now, now, now high, high, high.,” says Brinton. “Whereas now the market forces are pulling you away. Even someone who’s ready to go is kind of dragging their feet.”
he median existing home sales price climbed 11% from one year ago to $403,800 in July, marking 125 consecutive months of year-over-year increases. However, it was down by $10,000 from June’s record high of $413, 800, according to National Association of Realtors data.
Should you buy or rent a home?
The median monthly asking rent in the U.S. surpassed $2,000 for the first time in May, rising 15% year-over-year to a record high of $2,002.
Asking rents were up over 30% in Cincinnati, Seattle, and Nashville, Tennessee, and nearly 50% in Austin, Texas.
In July, the national median asking rent was up 14% year-over-year to $2,032.
“Rent prices have gone up in the last 18 months, much faster than any other time in recent history,” says housing analyst Logan Mohtashami. “So the question is, ‘Can you tolerate the rent increases on a yearly basis?‘”
With a home purchase, even at a higher interest rate, a buyer is opting for a fixed payment plan, says Mohtashami. And if mortgage rates go down next year, homebuyers have the option to refinance.