42% of Homes Are Taking Price Cuts. Why Are Buyers Still Sitting on the Sidelines?

On CNBC Monday morning, Mike Miedler, President and CEO of Century 21 Real Estate, argued that homebuyers are delaying buying homes due to a lack of confidence: “What we need to see to get things stoked is not a magic rate, it’s kind of more confidence,” he said, pointing to first-time buyers and would-be move-up buyers as the groups feeling the most pressure.

42% of Homes Are Taking Price Cuts

The numbers Miedler’s seeing show a market that, on paper, has swung toward buyers. “We have about 1.1 million homes on the market right now. That’s more than we’ve seen pre-pandemic. So going back to 2019 is when you have to look back to see that kind of inventory out of the market. And quite candidly, that is showing up in about 42% of homes taking a price cut right now,“ he said.

Existing home sales ran at an annualized 4.06 million in July, which sits in the range the Federal Reserve Economic Data guide labels as a soft market. More listings plus fewer buyers produce the price cuts Miedler describes.

The Previous 2% Mortgage Rate Lock-In Is Still Freezing the Market

A homeowner sitting on a 2-3% mortgage would face a materially higher interest rate today on a new mortgage. “Where we’re really seeing the issue is obviously in the first-time homebuyers and that kind of move-up buyer that has had the 2 or 3 percent mortgage left over from refinancing during COVID,” he said.

This trickles across the market, because these houses that would eventually be sold never end up hitting the market. First-time buyers then compete for a narrower slice of inventory, even when the overall listing count improves. The 10-year Treasury yield sat at 4.67% on August 27, with the federal funds target upper bound held at 3.75% since December.

Your Mortgage Rate Is Only One Part of the Housing Bill

Miedler’s most practical point: the mortgage rate is just one line item among several when buying a home. “Housing is inflationary, not just in the borrowing costs, but obviously closing costs, taxes, prices, all those things that surround the housing market,” he said.

A household’s monthly carrying cost includes property taxes, homeowners insurance, and, in many cases, HOA dues and mortgage insurance. Insurance premiums and tax assessments have moved independently of the Fed. Robert Reich warned on August 26 that tariffs on Canadian lumber and forest products would worsen an already-stressed housing market and push home prices higher, which speaks to the same broader-cost point Miedler is making.

Century 21 CEO Says Confidence Is the Missing Ingredient

Miedler believes real estate is one of the most rate-sensitive industries in the U.S.: “The residential real estate industry specifically is probably one of the most rate-sensitive industries that we have out there. Certainly any movement in the mortgage rate, especially higher, turns demand from a buyer side really quickly,” he said.

On top of interest rates, buyers aren’t going to go out and buy a new home if they don’t have the confidence that they’re going to keep their job. Unemployment stood at 4.1% in July, within the range FRED’s guide calls healthy. Consumer sentiment, though, is another story: the University of Michigan index registered 55.2 in July, well below the level the guide labels neutral. Households feel worse than the payroll data suggests they should, and mortgage underwriting cannot fix that gap.

Key Takeaways

Lower mortgage rates would certainly help housing demand, but Miedler’s argument is that they will not solve the market by themselves. With more inventory and widespread price cuts already creating negotiating room, buyers may be better served by calculating their full monthly housing cost rather than waiting for lower mortgage rates.

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