The U.S. housing market may finally be cooling off.
Nearly one in five home sellers dropped their price during the four-week period ending May 22 — the highest rate since 2019, according to a weekly Redfin study published Thursday. The same four-week period saw 13% fewer "homes for sale" browser searches on Google, and a 12% year-over-year drop in home tours and other related services from Redfin agents — the largest such decline since April 2020.
Meanwhile, the Market Composite Index, which tracks mortgage purchase applications, dropped 1.2% during the week ending May 20. And sales of new homes are at their lowest level since April 2020, down 16.6% from March, according to a U.S. Census Bureau report published Tuesday.
Taken together, the numbers suggest that increasing homeownership costs have shrunk the pool of potential homebuyers, forcing sellers to lower their prices. The interest rate for a 30-year fixed-rate mortgage has surged by nearly 2% since January, increasing monthly mortgage costs by 42.1% year over year as of May 22, per Redfin's data.
Sellers are still asking for a lot of money: The median asking price for a home climbed to a record-setting $418,000, up 17.8% year over year, according to the Redfin study. But the rate of price growth has been relatively low over the past four weeks, suggesting a possible plateau.
"The picture of a softening housing market is becoming more clear, especially to home sellers increasingly turning to price drops as buyers become more cost-conscious under higher mortgage rates," Daryl Fairweather, a Redfin chief economist, wrote in the study's report. "For now, mortgage rates have stabilized, and I expect prices to do the same."
In Redfin's previous report, Fairweather also commented on the potential slowdown, noting that homebuyers might be able to take advantage of sinking prices throughout the upcoming summer.
"This sudden pressure on sellers is good news for those homebuyers who can still afford to buy at today's higher mortgage rates," she wrote. "These trends point to an even cooler market this summer."