Homes sell below asking in 38 of 50 largest US metros

Homes sold below asking in 38 of the 50 largest US housing markets in June, as higher borrowing costs squeezed buyer budgets and sellers in Florida and Texas cut prices to move inventory.

"Buyers notice right away when mortgage rates go up because it's more expensive for them to buy a home," said Daryl Fairweather, chief economist at Redfin. "It takes a while for sellers to realize, 'Hey, maybe I need to price lower.'"

The biggest discounts were concentrated in Florida and Texas. Homes in Miami and West Palm Beach sold for nearly 5 percent below asking on average, while buyers across much of the South typically paid 2 to 3 percent below asking in June. Nationally, only about 25 percent of homes are selling above their asking price, down from roughly 55 percent at the pandemic-era peak in 2022, according to Redfin. By contrast, sellers in San Francisco, New York and Boston are getting slightly more than their asking price on average.

The shift toward a buyer-favorable market coincides with a narrowing rent-versus-buy gap. Renting a starter home still costs less than buying in all 50 largest metros, but the monthly savings fell to $858 in July from $923 a year earlier, according to Realtor.com. The national median asking rent dropped 1.4 percent year over year to $1,695, marking the 36th consecutive month of declines, while starter-home listing prices fell faster at 2.9 percent.

The discount pattern reflects a market where sellers have been slower to adjust expectations than buyers. The 30-year fixed mortgage rate, at 6.54 percent in July, remains far above the roughly 3 percent levels that fueled the 2021-2022 buying boom, and some owners who bought near the peak have little room to cut their asking price and still turn a profit after commissions and selling costs, Fairweather said.

Florida and Texas markets with the biggest discounts also experienced a surge in homebuilding during and after the pandemic, giving buyers more options. In those metros, rising insurance premiums and property taxes have increased the cost of owning a home, shrinking the pool of buyers while putting more pressure on sellers to negotiate.

Rent-versus-buy gap narrows in seven metros

The rent-versus-buy calculus is shifting in a handful of markets. Seven metros — Oklahoma City, Orlando, Seattle, Miami, Tampa, Las Vegas and Nashville — combine starter-home price declines faster than rents with wage growth at or above the 3.8 percent national rate, according to Realtor.com. Orlando is closest to a monthly crossover, where buying costs only $19 more per month than renting. Oklahoma City pairs a 9 percent drop in starter-home listing prices with a 4.1 percent rise in average weekly earnings.

"Improving buying conditions do not make the decision to purchase automatic, especially when renting is still cheaper," said Jiayi Xu, senior economist at Realtor.com. "These conditions do give renters more flexibility and confidence when making that decision."

For buyers, negotiating room depends on the market and the individual home. Fairweather recommends checking the local sale-to-list ratio — the typical gap between asking and final prices — and watching time on market. A newly listed property may still attract multiple offers, while a home sitting for several weeks or with a price cut offers more room. Buyers may also ask sellers to cover closing costs or provide repair credits, and cash offers generally strengthen a buyer's position because they are viewed as more likely to close.

"In neighborhoods where inventory remains limited and demand is strong, homes that are priced right are still selling quickly and often with multiple offers," said Bill Kowalczuk, a real estate broker at Coldwell Banker Warburg in New York City. "What we're really seeing is a more balanced market where pricing actually matters again."

The affordability constraint remains the binding factor. Even with discounts, the average monthly cost to buy a starter home in the largest 50 metros was $2,553 in July, and record-high prices mean a 10 percent down payment still requires substantial savings. If mortgage rates hold near current levels and sellers continue to cut prices, the buyer-favorable trend could deepen into 2027; if rates fall sharply, competition could return quickly, erasing the negotiating leverage buyers have gained.

This article is for informational purposes only and does not constitute investment advice.