KC Home Prices Aren't Declining, But Headlines Might Make You Think They Are

You may have noticed recent news about home sellers reducing prices, which may seem concerning. However, here's the reality regarding home prices: they are currently higher than a year ago and are expected to continue increasing at a slower rate.

A recent article from Redfin highlighted that "Price Drops Hit Highest Level in 18 Months As High Rates Dampen Buyer Demand," which might lead some to believe that prices are decreasing. While it's true that the latest report from Realtor.com shows that 16.6% of homes on the market had price reductions in May, up from 12.7% last May, this doesn't necessarily indicate an overall decline in home prices.

Understanding the distinction between asking price and sold price is crucial.

Understanding Asking Price vs. Sold Price
The asking price, also known as the listing price, is the amount a seller hopes to get for their home when they list it. However, sellers cannot set any price they want in part because buyers are becoming more discerning, especially with the current strain on budgets due to higher mortgage rates.

The asking price can change based on market factors and the offers received by the seller. If a seller gets little interest, they may revise the price to reignite interest. This could be due to overpricing the house initially. When you see "price drops" in a headline, it may sound like home prices are declining, but it could simply be a strategy to attract more buyers.

According to Mike Simonsen, CEO and Founder of Altos Research, a higher percentage of homes have price cuts compared to a year ago, and more are happening each week. On the other hand, the final sold price is the amount a buyer pays when the transaction is complete. It's important to note that actual sold prices are still rising and are expected to continue rising over the next five years.

What Does This Mean for Home Prices?
There has been an increase in price reductions recently, but overall home values are still increasing. This increase indicates a moderation in demand, leading sellers to adjust their expectations to match the current market conditions.

Despite more price reductions, home values have grown by 6.6% over the last year, as reported by the Federal Housing Finance Agency (FHFA). This growth is evident across the country on the provided map, suggesting that the market is still growing (see below).

While seller price reductions may indicate an upcoming moderation in prices, experts have been forecasting this trend for some time. However, it is not necessarily cause for alarm. Due to high mortgage rates, Redfin's article also suggests that sale-price growth could soften in the coming months. With inventory remaining tight, price moderation in the upcoming months is more probable than price declines.

Why This Is Good News for Buyers and Sellers
For buyers, more realistically asking prices means a better chance of securing a home at a fair price. It also means you can confidently enter the market, knowing prices are stabilizing rather than skyrocketing. Understanding the need to adjust your asking price can lead to faster sales and fewer price negotiations for sellers. Setting a realistic price can attract more serious buyers and lead to smoother transactions.

Bottom Line
While the increase in price reductions may appear concerning, it is not a cause for worry. It indicates a market adapting to new conditions, with home prices still rising more moderately. Questions? Contact the Just Say Home KC Team at 816-656-2816, we are here to assist you!

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