The market is cooling fastest in areas where affordability has gotten particularly out of whack. California — where only 16% of households could afford to buy at the end of the second quarter, according to the state Realtors association — has had some of the biggest home-price declines.

San Francisco and Los Angeles led the nation with a 3.4% drop in August from the previous month, Zillow data show. Sacramento, Seattle and Salt Lake City all had decreases of more than 2.5%. Nationwide, prices fell 0.3% from July — the most in 11 years.

Traditionally, September and October are the best months to purchase because the buyer rush before the start of the school year is over and at the same time, inventory grows because those who haven’t sold are now competing against new listings. But buyer calculations are now being upended, said George Ratiu, senior economist with Realtor.com.

“For buyers, the fall of 2022 is a time of great tension,” Ratiu said. “There’s the promise of this being the best time of the year to buy a house historically and the risk of an impending economic recession, and buying in a declining housing market.”

They also may have limited choices with sellers staying put. Roughly six out of seven homeowners with mortgages have loans with an interest rate far below the current level of around 6%, according to Redfin Corp. That, and hesitancy to sell into a declining market, is hindering growth in new supply, the brokerage said in a report this week. That could limit price declines from becoming too steep.

It’s a different story in the new-home market, where builders who cranked up production earlier this year now are contending with too much inventory. Almost half of builders said they cut prices in August, up from just 8% in May and the highest since at least 2010, according to Rick Palacios Jr., director of research at John Burns Real Estate Consulting in Irvine, California.

Like the weather, so much depends on geography. East Coast markets, from New York and Boston to Florida have remained relatively strong. And for the right price, homes are still selling even in the Sun Belt, where demand has downshifted most.

In Austin, Texas, where many local buyers have been priced out following a pandemic-fueled boom, home sellers are dropping asking prices 10% or 20% below what they expected as recently as June, said Gabriel Recio, an agent with Redfin. They’re offering concessions to close deals, such as $10,000 gift certificates to Home Depot, he said.

But there are limits to how far prices will drop, because most sellers aren’t desperate, he said.

“I get a lot of buyers hoping things go back 40% or 50%,” Recio said. “They’re dreaming.”

Sellers in Las Vegas are helping with closing costs and boosting broker fees, said Tzahi Arbeli, a local Redfin agent. He counsels buyers to get the house they want and suck up today’s mortgage rates, because there’s a chance they can refinance for less in the future — or rates could go even higher and push a home out of reach.

“Marry the house,” Arbeli said. “Date the rate.”

--With assistance from Jennifer Epstein.

This article was provided by Bloomberg News.

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