As borrowing costs continue to rise, the US housing market is experiencing a significant cooling, with a large number of sellers cutting prices to facilitate deals.

Among the 50 largest metropolises in the United States, prices fell 11.5% in May, up from 8.2% in the same period last year, according to Zillow, the largest real estate information website in the United States. Salt Lake City, Las Vegas and Sacramento, Calif., where prices have risen rapidly, have seen the fastest decline in listed prices.

The main reason for the surge in house prices in these areas is that non-local buyers moved in during the epidemic, competing with locals for limited housing supply. The number of migrants in the Salt Lake City metropolitan area, including Provo and Ogden, almost tripled throughout 2020. The migration trend has begun to reverse, with Salt Lake City recording net outflows for the first time in the first quarter.

Market analysts believe that the continued blow to affordability by rising house prices and rapidly rising mortgage rates led to a slowdown in home purchase applications in May. Inflationary pressures and mortgage rates above 5% are headwinds for the housing market in the coming months.

In response to the seller's reduction in the listing price, Daryl Fairweather, chief economist of Redfin, commented:

There are two kinds of sellers in today's market: those who already know the cooling of the market, and those who understand the cooling of the market during the sales process.

The former want to sell quickly before the market slows further, and they are willing to sell immediately at slightly lower prices than similar homes nearby, while the latter may have to cut prices if their homes cannot attract buyers within a few weeks.

According to the latest Redfin data, 30-year fixed mortgage rates in the US surged above 6 per cent at the fastest rate (slope) on record as the Fed aggressively raised interest rates to curb inflation, a level last seen before the bursting of the US housing bubble in 2008.

In the past six months alone, the median monthly mortgage payments in the US have increased by nearly $800.

As mortgage rates soared to their highest level since 2008, the number of potential home buyers plummeted and sellers began to lower their list prices.