Home Prices Aren’t Declining, But Headlines Might Make You Think They Are

Lately, you might have seen headlines about home sellers cutting prices, which can be misleading. They often create more fear than clarity. The truth is, home prices are still higher than they were a year ago and are expected to keep rising, just not as rapidly. For example, an article from Redfin points out that “Price Drops Hit Highest Level in 18 Months As High Rates Dampen Buyer Demand.” While this might make it seem like prices are going down, it doesn't tell the whole story. Reports show that 16.6% of homes in May had price reductions, up from 12.7% last year. But reducing an asking price doesn't mean the overall home prices are falling. Here's why: **Understanding Asking Price vs. Sold Price:** - **Asking Price:** This is what sellers hope to get for their home when they list it. Due to higher mortgage rates and savvy buyers, sellers sometimes need to adjust their prices to attract interest. This leads to “price reductions,” which might sound alarming but usually mean the initial price was too high. - **Sold Price:** This is the final amount a buyer actually pays. Importantly, overall sold prices are still rising and are expected to continue rising over the next few years. So, while more homes are seeing price reductions recently, it doesn't mean the market is declining. It's just adjusting to current conditions. **What Does This Mean for Home Prices?** Even with more price cuts, home values generally continue to grow each year. For instance, the Federal Housing Finance Agency (FHFA) reports that home prices went up 6.6% over the last year. So overall, home prices are still on the rise. **Why This Is Good News:** - **For Buyers:** More reasonable asking prices provide a better chance to buy a home at a fair price and enter the market with confidence. - **For Sellers:** Adjusting your asking price can lead to quicker sales and fewer negotiations. Starting with a realistic price can attract more serious buyers. **Bottom Line:** Even though price reductions might seem worrying, they’re just part of a market adjusting to new conditions. Home prices are still going up, just more moderately. --- Does that capture it well for you?

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