Rising mortgage rates are causing more home sellers to lower their asking prices

The red-hot housing market may be starting to give buyers a break according to several new reports from real estate companies. Some sellers are lowering their asking prices as more listings come up for sale.

The number of new listings last week was 8% higher than a year ago. There have been four straight weeks of declines in new listings. The total amount of active inventory for sale is still down from a year ago, but it may be on track, given the rise in new listings, to surpass year-ago levels by this summer. May is when new listings tend to peak.

Prices are still higher than they were a year ago. Houses are less affordable because of higher mortgage rates. The average homeowner is paying more than they would have paid a year ago on their monthly mortgage payment.

General inflation and related mortgage rate hikes mean less budget flexibility for some buyers. For those who can afford to persist, a silver lining could be less competition for more for sale home options, which could lead to some relief from relentless home price momentum.

As more supply comes on the market and mortgage rates rise, sellers seem to be coming back to Earth. During the four weeks ending April 3, 12% of homes for sale had a price drop. That is up from a year ago. Since August, the rate of sellers dropping their asking prices has increased.

The fact that price drops are becoming more frequent is a sign that the housing market is cooling. There is still more demand than supply, but sellers can no longer overprice their home and still expect buyers to clamor at their door.

The average rate on the 30-year fixed mortgage has risen in the past few weeks and buyers are sweating. According to Mortgage News Daily, it surpassed 5% earlier this week. According to a monthly survey from Fannie Mae, consumers are more pessimistic about the housing market.

The share of consumers who expect mortgage rates to go up went up from March. More consumers think that home prices will continue to rise.

Mark Palim, vice president and deputy chief economist at Fannie, wrote that if consumer pessimism toward homebuying conditions continues and the recent mortgage rate increases are sustained, then we expect to see an even greater cooling of the housing market than previously forecast.