Home Prices Aren't Dropping, Despite Headlines

If you’ve seen recent news about home sellers slashing prices, it’s a classic case of headlines creating confusion. Here’s what’s really happening with prices.

Home prices are higher than they were a year ago and are expected to keep rising, albeit more slowly. This is also true here in the Vero Beach real estate market.  However, recent reports can be misleading. Redfin notes, “Price Drops Hit Highest Level in 18 Months As High Rates Dampen Buyer Demand,” which may suggest prices are declining.

The latest from Realtor.com shows 16.6% of homes on the market had price reductions in May, up from 12.7% last May. But this doesn’t mean overall home prices are falling.

Understanding Asking Price vs. Sold Price

The asking price is what a seller hopes to get, while the sold price is what the buyer actually pays. Savvy buyers, strained by higher mortgage rates, are less willing to pay premium prices, leading sellers to adjust their asking prices. This adjustment often results in price reductions, which can sound like home prices are falling when they’re not.

Mike Simonsen, CEO of Altos Research, notes an increase in the share of homes with price cuts compared to last year. Despite this, actual sold prices are still rising and are expected to continue to do so over the next five years.

What Does This Mean for Home Prices?

The increase in price reductions doesn’t indicate a decline in home values. It reflects a moderating demand, prompting sellers to adjust their expectations. According to the Federal Housing Finance Agency, home prices increased by 6.6% over the past year, indicating a strong market (see chart below).

Why This Is Good News for Buyers and Sellers

For buyers, realistic asking prices mean a better chance of securing a home at a fair price. For sellers, adjusting the asking price can lead to faster sales and smoother transactions.

Bottom Line

The rise in price reductions is a market adjustment, not a cause for concern. Home prices are still growing, just at a more moderate pace. If you are considering buying or selling a home in Vero Beach area, complete the following form with your contact information and I will get back to you to discuss your needs and identify the best options for your next move.