Home prices are rising, new data shows

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Home prices are rising, new data shows

The national inventory of homes for sale grew at a record pace for a third consecutive month in July, the latest sign that rising borrowing costs are starting to cool off the housing market.

According to the latest Monthly Housing Trends report published on Tuesday by Realtor.com, the number of active listings in the U.S. increased by 30.7% from the previous year. Danielle Hale, chief economist at Realtor.com said the U.S. housing market continues to move toward more evenly balanced supply and demand compared to the 2021 frenzy. Our July data shows that the elevated mortgage rates left many buyers tightening their budgets and sellers responding with price reductions, while home shoppers looking for more options, according to our July data. The moves to tighten policy at the fastest pace in the last three decades in order to cool consumer demand and control inflation have resulted in a cooling of the interest rate-sensitive housing market in recent months. Policymakers approved two back-to-back 75 basis point rate hikes in June and July and indicated that another increase of that magnitude is possible in September, which is a sign of the upcoming economic data.

The average rate on the most popular among new homeowners rose to nearly 6% in June, though they've since moderated. The average mortgage interest rate for a 30 year fixed mortgage hovered around 4.99% for the week ending August 4, according to recent data from mortgage lender Freddie Mac.

That is much higher than just a year ago when rates were at 2.77%.

The rapid rise in borrowing costs has pushed many entry-level homebuyers out of the market, combined with high home prices. A new report by Redfin showed that the share of sale agreements on existing homes canceled in June was just over 15% of all homes that went under contract the highest since early 2020, at the height of the COVID-19 epidemic.

Sellers have responded to the slowdown in purchases by cutting prices, although they remain near all-time highs. The median list price was $449,000 in July, up about 17% from the same period a year ago.

With inventories increasing, buyers will have more negotiating power, Hale said. The two years of a market heavily tipped in favor of sellers seems to be in the rearview mirror.