A significant number of sellers around the U.S. are cutting prices as high mortgage rates and fears of a potential recession keep many prospective buyers at bay.
A recent report by Redfin indicated over 25% of home sellers in three-quarters of metros tracked by the brokerage nationwide dropped their asking prices in June.
In some areas, more than 60% of sellers dropped their prices which, according to the report, has "become a common feature of the cooling housing market, particularly in places that were popular with homebuyers earlier in the pandemic."
Thirty-year mortgage rates are much higher than they were earlier in the year, which "has really eaten into homebuyer budgets," Redfin Chief Economist Daryl Fairweather told FOX Business.
According to mortgage buyer Freddie Mac, 30-year fixed mortgage rates averaged 5.54% this week, up from 5.51% a week ago.
Some homebuyers had to drop out of the buying market completely and face the rental market, while others are still in the game but "are a lot less willing to bid over asking price or entertain homes that are overpriced," Fairweather added.
Since buyers are "more jittery," sellers are making concessions and dropping prices. Fairweather said sellers no longer have the luxury of choosing between dozens of offers like they would have had earlier this year.
Boise, Idaho, had the biggest share of buyers, 61.5%, that dropped their asking prices, according to the analysis. That's up from 25.7% in June 2021.
Denver, Colorado, and Salt Lake City, Utah, were not far behind with 55.1% and 51.6% of sellers dropping their prices, according to the report.
Nearly half of sellers in Tacoma, Washington; Grand Rapids, Michigan and Sacramento, California also dropped their prices.
Boise, Salt Lake City, Sacramento and Tampa were popular hotspots between summer 2020 and March 2022, "as homebuyers moved in from pricey coastal job centers, taking advantage of low mortgage rates and remote work," according to Redfin.
However, their popularity worked against them.
"Their popularity led to heated competition for a limited supply of homes for sale, pushing up prices and making them unaffordable for many buyers," the report continued.
For instance, the typical home in Boise sold for $550,000 in May, 60% higher than two years ago, according to the report. Similarly, prices for the typical home in Sacramento increased 44% to $610,000.
"Consumer sentiment is also making home buyers more reluctant to stretch their budgets," Fairweather added.
Not only are homebuyers worried about inflation continuing to rise, but they are also concerned about what would happen if the economy falls into a recession and unemployment rates increase, according to Fairweather.
"Homebuyers don't want to be in a situation where they can't afford their mortgage because they don't have the income they thought they were going to have," Fairweather added.