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U.S. housing prices just hit a new record high, with a median price of nearly $400,000, but price growth may stall out according to real estate company Redfin Corp (NASDAQ:RDFN).
In a recent note, Redfin highlighted a 4.7% year-over-year growth in the median home price, the largest increase in more than 4 months.
The price growth of homes comes as mortgage rates have retreated from their highs in October 2023. With mortgage rates lowering, in addition to a market with historically low inventory, strong demand has pushed the average home price higher.
Despite mortgage rates coming down, mortgage-purchase applications are down 13% year-over-year, in a sign that high prices may be deterring would-be homebuyers. In fact, more homes are selling for less than the original asking price than at any point in the last four years.
"There are signs that price growth may lose momentum soon," the report reads. "The typical home is selling for 0.4% less than its asking price, marking the first time the typical home has sold under list price at the start of July since 2020."
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Redfin also points out that inventory is on the rise, potentially creating a plateau in the price growth of homes. And, if the Federal Reserve does end up cutting interest rates, it will help homebuilders borrow money to build more homes, thus increasing supply and potentially helping bring the price of homes lower.
"Although inventory is still historically low, it is rising on a year-over-year basis, which is another sign that price growth may lose steam in the coming months," Redfin's note says. "New listings are up 7.3% year over year, and the total number of homes for sale is up 18.3%, with most homes for sale growing stale: More than 60% of homes are listed for at least a month without going under contract."
Price Action: If housing prices do fall, it could cut into the earnings of homebuilders like KB Home (NYSE:KBH) and Toll Brothers Inc (NYSE:TOL). But, companies that rely on the sales of homes, like Zillow Group (NASDAQ:Z) could see an increase in business if lower prices encourage new buyers to enter the market.
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Image created using artificial intelligence via Midjourney.
