Housing affordability hits the biggest milestone since 2020

America's housing market just hit a significant milestone: for the first time since 2020, the average home is now selling for less than the asking price.

According to a recent Redfin report, in the four weeks to June 23, housing listings have, on average, closed at 0.3% below what sellers initially requested.

While there are some areas with higher levels of competition, just 32.3% of properties overall sold for more than the asking price—the lowest proportion since Covid began.

Over this four-week period, about 7% have dropped their asking price, and that's the highest level since November 2022.

A few factors can explain this cooling momentum.

Higher mortgage rates, coupled with house prices already near record levels, mean the typical homebuyer is now spending $2,785 a month on mortgage payments alone.

The affordability is so low that middle-class households can now only afford to buy the average home in 52 of America's largest metro areas, according to Creditnews Research.

A less-documented home sale price dampener is the extreme heat seen nationwide.

Joe Hunt, a Redfin manager in Texas, was quoted as saying, "I've heard some clients say, 'It's so hot outside I don’t want to see anything.'"

On a seasonally adjusted basis, figures from the Mortgage Bankers Association show home loan applications in the week to June 21 were down 13% compared with a year earlier.

Advice for buyers and sellers

Redfin says this latest data carries significant takeaways for buyers and sellers.

Those looking to put their home on the market have to get realistic when setting an asking price because the demand for housing, albeit slowly, is slowing.

Meanwhile, buyers shouldn't expect to haggle the price down below asking every time. Redfin says a sweetened deal is only likely if a home has gone unsold for a little while.

Even then, it also depends on where you're hoping to live.

"Some buyers think they can get a deal because they're hearing the market is cool, and some sellers think every home will sell for top dollar no matter the condition,” said Marije Kruythoff, a Redfin agent in LA.

"In reality, everything depends on the house and the location."

There are some stark year-on-year contrasts in key metrics that provide an insight into the health of the housing market.

For example, just 41.4% of homes listed for sale are now off the market within two weeks. This time last year, that figure stood at 46%.

Meanwhile, properties now tend to be listed for longer, too. The latest four-week average stands at 31 days, compared with 27 back in June 2023.

That said, there's a big divergence in sales activity and prices across the nation.

In Anaheim, Nassau County, New Brunswick, Newark, and West Palm Beach, median sale prices have enjoyed double-digit gains over the past year.

Meanwhile, Texas housing markets are going on sale, with four metros, San Antonio, Austin, Dallas, and Fort Worth, reporting the biggest year-on-year declines.