Mortgage rates are climbing again. The economic mood is dreary, and home prices are still out of reach for plenty of would-be buyers.
By every macro signal, the spring housing market should be frozen. It isn't, and the reason is hiding inside the listing data.
Contract signings have ticked up for three months in a row, running 3.2% ahead of last April, with completed sales also eking out a small gain month over month. The thing pulling those numbers higher isn't lower rates, it's a quiet truce on price.
Sellers cut prices on fewer homes this April than they did a year ago, according to Realtor.com data, even though median list prices per square foot also fell. Translation: sellers are starting their listings closer to what buyers will actually pay, instead of testing the market high and then chasing the market down.
"It's not just that more buyers are coming to market, but that sellers are pricing initially at a level that is basically meeting buyers where they are," said Realtor.com senior economist Jake Krimmel.
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The cities seeing the biggest drop in price cuts share one thing in common, which is that they were all pandemic boomtowns where home values overshot and then had to grind back down.
In Jacksonville, the share of sellers slashing prices fell 5.1 percentage points from a year ago, while Miami's number is down 4.4 points, and contract signings are now rising in both cities.
Philadelphia is the flip side of the same story, with price cuts there falling 3.4 points month over month on a different driver. Redfin Premier agent Brenda Beiser said the city is being held up by strong demand and almost nothing to buy, adding that "buyers have to work really hard to get a house."
Even in Raleigh, North Carolina, the truce shows up in seller behavior. Realtor Samantha Gradle said the last six months have been "really, really nice" because sellers are offering concessions like paid roof repairs to push deals across the line, rather than waiting out the buyer.
Mortgage rates have climbed sharply in recent weeks on global inflation worries and the Iran War, and affordability has slipped since February. That puts the market on a narrow ledge where any further rate move could break the truce.
As long as buyers and sellers keep meeting in the middle, the recent momentum can hold. Krimmel put it plainly when he said it's going to be a question of when, not if, affordability eats into housing demand.
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