The housing market is seeing an uptick in price reductions, but that doesn’t necessarily mean relief for prospective buyers.
According to Redfin, 6.4% of active listings had a price cut in the week ending May 26. That’s a notable jump from 4.4% in the same period last year and higher than the levels seen in 2022 and 2021.
Signs of a Softer Market
Fewer homes are selling within two weeks of being listed—dropping to 42.9% from 45.7% last year.
New listings are up 7.8% year-over-year, but both figures remain below pre-pandemic levels, according to Redfin.
What’s Holding the Market Back?
Despite more listings and slower sales, high mortgage rates continue to restrict both supply and demand. Many first-time buyers are turning to rentals, finding them more affordable in the short term. Meanwhile, homeowners with low-interest mortgages hesitate to sell, knowing they’d face significantly higher payments even if they moved to a similarly priced home.
The idea that homeowners are “locked in” to their current properties stems from the record-low interest rates seen during the pandemic. When the Federal Reserve began hiking rates in 2022, mortgage rates more than doubled, making it far more expensive for homeowners to move.
The Real Cost of Buying
With elevated rates and home prices, the median monthly mortgage payment has surged to $2,843, a 13% increasefrom last year, according to Redfin. While some sellers may be cutting prices, home values continue to climb overall, suggesting many initially overestimated their listing prices.
Not a True Market Correction
While price reductions signal some market cooling, it’s unlikely to lead to a full-fledged buyer’s market. If mortgage rates drop due to Federal Reserve policy changes or improved inflation data, demand could spike quickly, driving prices back up.
Housing Supply Remains Constrained
A lack of new construction in desirable areas continues to limit inventory. Zoning restrictions in many regions make it difficult to build, preventing the level of new supply needed to shift the market in favor of buyers. This issue has been particularly pronounced in cities with restrictive zoning policies, as highlighted in a report on housing policy.
A Generational Tug-of-War Over Housing
A Redfin study found that homeownership tenure has doubled since 2006. Back then, the median homeowner stayed in their home for 6.5 years. That number peaked at 13.4 years in 2020 and has since dipped to 11.9 years in 2023.
Boomers Staying Put
56% of baby boomers have lived in their homes for at least a decade.
35% of Gen Xers have stayed in their homes for 10+ years.
Just 7% of millennials have owned a home for a decade or longer.
Who Owns the Most Space?
Empty-nester baby boomers own twice as many large homes—defined as having three or more bedrooms—as millennials with children, according to Redfin. However, many of these homes are aging and in need of renovations, making them less attractive to younger buyers.
Homes in Need of Updates
A study from Leaf Home and Morning Consult found that 73% of baby boomers have lived in their homes for 11 years or more, and over half own homes built before 1980 that have never been renovated. The majority have no plans to update them, further limiting move-in-ready options on the market.
With baby boomers holding onto their homes and high costs limiting new construction, housing inventory remains tight, making it increasingly difficult for younger generations to enter the market.
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