The share of discounted home listings is highest in 6 years

The number of U.S. home sellers slashing the asking price is the highest since 2018, signaling a weakening housing market, new data shows.

According to Nick Gerli, the CEO of housing data provider Reventure, 24.3% of homes listed for sale in June slashed their prices. That’s the highest level in six years.

The price drops are “a signal that there will be downward pressure on home prices in the second half of 2024,” he said.

Some markets are hit harder than others.

“Housing markets in Texas, Florida, and Arizona are experiencing skyrocketing inventory with lots of price cuts,” Gerli said. “These markets are a good bet to decline in H2 2024.”

Due to oversupply, a large housing bubble had developed in the South, with places like Florida, Texas, Georgia, and Tennessee at risk of major price cuts.

The other problem is that many sellers are still listing their homes at bloated prices. In Gerli’s view, they’ll eventually be forced to cut prices multiple times to sell their home.

As of June, the average listing price of a U.S. home was $445,000, which is 40% higher than pre-pandemic levels.

Although many homeowners built up significant equity in their homes in recent years, tapping into it isn't easy with mortgage rates at multi-decade highs.

“Immense” disconnect between buyers and sellers

According to Gerli, one of the biggest challenges in the current housing market is the “immense” disconnect between buyers and sellers.

At current prices and interest rates, the typical household would need to spend 40% of its gross monthly income, the highest amount in more than 40 years, to afford a home.

That level “locks the vast majority of buyers out of the market,” Gerli said.

According to Freddie Mac, average 30-year mortgage rates are hovering near 7%, having risen steadily since the start of the year.

Zillow’s senior economist, Orphe Divounguy, said the “rapid and sudden increase in mortgage rates in April pushed housing affordability further out of reach for potential buyers.”

At these rates, the average monthly housing payment is $2,815, assuming a 20% down payment on a $445,000 asking price, according to Zillow.

A 16% down payment, which is the U.S. national average, would push up payments to $2,925 a month.

This monthly payment includes taxes, insurance, mortgage interest, and private mortgage insurance on down payments of less than 20%.

Unfortunately, experts say it could take years before housing affordability improves—with Bank of America predicting record housing costs could drag on well into the 2030s.