There’s recently been a little bit of breathing room in the U.S. housing market as mortgage rates have slightly declined and home price increases have started to steady. But both buyers and sellers are still cautious.
Fewer homeowners are putting their homes on the market: Active listings fell 1.4% in August, which represents the biggest monthly decline since 2023, according to a Monday report from Redfin.
“High housing costs and economic jitters have rattled buyers, and that unease has spilled over to sellers,” Chen Zhao, Redfin’s head of economics research, wrote in the report. “We currently expect existing-home sales to end the year at around 4.05 million, or roughly flat compared to 2024, which was the worst year for sales since 1995.”
The housing market is stuck in an unending circle of gridlock: Buyers aren’t inclined to purchase a home because mortgage rates and home prices are too high (they’re up 1.7% year over year at $440,004, according to Redfin). And homeowners don’t want to sell their homes to trade for a higher mortgage rate and out of fear they won’t get what they think their home is worth.
That gridlock has forced some sellers to slash asking prices or pull their listings off the market altogether. Delistings—or taking a home off the market—jumped 47% nationally in June from a year ago, according to Realtor.com, and are up 34% year to date.
“What we’re seeing nationally is a market that’s gradually rebalancing, with buyers gaining leverage and sellers facing a tradeoff: Adjust to the market and sell for less, or hold out and risk sitting indefinitely,” Realtor.com Senior Economist Jake Krimmel previously told Fortune. “Many sellers still aren’t pricing to sell.”
Redfin data shows sellers have been pulling back because homebuyer demand is sluggish. In fact, sales are still far lower than even pre-pandemic levels, and the slight drop in mortgage rates hasn’t proven to be effective yet.
“But that may change if rates continue declining; if we get a stronger-than-expected fall housing market, existing-home sales could end this year a little higher than last year,” Chen wrote.
Redfin’s figures show mortgage rates fell to 6.59% in August, the lowest monthly average in 10 months. According to Mortgage News Daily, the 30-year fixed rate mortgage as of Monday is 6.35%, down from 7% in May.
There is debate about the magic number it would take for buyers to be inclined to take out a mortgage. While Beth Behling, a Redfin Premier real estate agent in Chicago, said in a statement she thinks the magic number is 6%, others have said closer to 5% would make more of a meaningful difference.
Zillow reported in early August it would take mortgage rates dropping to about 4.43% to make an average home affordable for a typical buyer—although the real estate site’s economic analyst Anushna Prakash said this was “unrealistic” considering the huge drop required to get there.
“It’s unlikely rates will drop to the mid-[4% range] anytime soon,” Arlington, Va.-based real estate agent Philippa Main previously told Fortune. “And even if they did, housing prices are still at historic highs.”