Many homes are sitting stagnant on the market, causing more frequent price drops
Buyers in major cities struggle to afford high-cost homes
Home sales fell 3.8% in June, the largest decline in months. (iStock)
Sellers are pricing their homes at record-high prices, but buyers aren’t biting. High interest rates and high listing prices are keeping buyers away. This does mean that the buyers who are still looking have some wiggle room they haven’t had in the last few years.
Pending home sales fell by 3.8% for the first half of June, the largest decline in about four months, according to Redfin data. As homes stay stagnant on the market, their listings sitting online for more than a month or more, some sellers are cutting prices.
"A few years ago, I never would have told a seller they need to freshen up their paint, fix their furnace and make sure their roof is up to date before putting their home on the market–but now, I tell them to make the house as pretty as they possibly can," Des Bourgeois, a Redfin Premier agent in Detroit said.
"Buyers are still out there and they’re willing to pay today’s high prices, but only if the house is in really good shape. They don’t want to spend extra money on paint or new appliances," said Bourgeois.
Sales are also down because desirable listings are down. Technically, new listings are up 7.7% year over year, but this is much lower than normal for this time of year, Redfin’s report explains.
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Major cities are struggling to attract homebuyers
Cities that were once real estate hot spots have gotten a little too hot in recent years, with high prices dissuading homebuyers from purchasing homes. Los Angeles and Philadelphia are two of the major cities seeing low buying numbers.
In Los Angeles County, home sales are occurring at a record low pace. Just over 107,000 homes in L.A. County were sold in last 24 months, which is the slowest selling pace since 1988. It’s also the ninth-consecutive month a record low number of sales occurred.
Homes aren’t selling as fast, largely due to an affordability crisis in the country. Only 14% of households in the county qualify to buy the homes currently listed.
Philadelphia buyers have also lost much of their homebuying power in recent years. Buying power has decreased by nearly 65% from 1970 to 2022. This has caused housing to become 2.83 times more unaffordable since the 1970s.
To give some perspective, in the 1970s, home prices in Philadelphia averaged $10,600 compared to $215,000 in 2022.
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Another Pennsylvania city ranks as one of the most affordable markets
Despite high prices in Philadelphia, another major Pennsylvania city boasts some of the most affordable home prices. The typical home value in Pittsburgh is $202,454, according to Zillow. This makes the typical monthly mortgage payment around $1,053.
Outside of Pennsylvania, Jackson, MS is second on Zillow’s list of the most affordable places to buy. Typical home values are below $200,000, averaging just over $185,000, making the average mortgage payment $964.
Coming in third is Syracuse, NY, one of the more affordable cities in the Northeast. The average home price is $212,404. Buyers often spend about 23% of their income on their mortgage payments.
Ohio and Kansas take the next three spots on Zillow’s list, with homes averaging just under $200,000 in Ohio and just over in Kansas.
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