According to national real estate broker Redfin, the U.S. home market is suffering a second setback this month as rising economic uncertainty and persistent inflation combined with recently struck 20-year high mortgage rates.

Even more significant yearly decreases in both pending home sales and new listings were recorded than over the summer when buyers and sellers initially reacted to quickly rising rates. Data on selling prices is also softer than it was over the summer when the global homebuying boom stopped. Sale price data often lags behind other demand indications by a few months. The proportion of houses sold over the final list price decreased to its lowest level since the early days of the epidemic, while the share of home listings with a price drop increased to its greatest story ever.

Before they increased to over 7% this month, potential homebuyers and sellers hardly had time to get acclimated to 5.5% mortgage rates, according to Taylor Marr, Redfin’s deputy chief economist. “Along with anxiety over inflation and the state of the economy, the second abrupt rate rises this year is causing house sales activity to decline even more than it did over the summer, and buyer confidence is already approaching an all-time low. For homeowners who don’t want to market their house while demand is low or give up their own low mortgage rate, the combination is equally unsettling.”

Since Hurricane Ian served as an extra barrier to some homebuyers and sellers at the end of September, demand has climbed marginally from the previous week.

Leading indicators of homebuying activity:

  • 30-year mortgage rates increased to 6.9% for the week ending October 13, the highest level since April 2002.
  • Fewer people used Google to look for “homes for sale.” The week ending October 8 had a 35% decline in searches from the previous year, bringing them down to a level comparable to March 2020.
  • The seasonally adjusted Redfin Homebuyer Demand Index, which tracks how often Redfin agents are asked to arrange home tours and other services related to home purchases, was down 25% year over year but marginally up from the previous four-week period.
  • According to house tour technology provider ShowingTime, the number of tours as of October 9 was down 23% from the beginning of the year, as opposed to a 9% growth at the same time the previous year.
  • During the week ending October 7, seasonally adjusted mortgage purchase applications fell 39% from the prior year and fell 2% week over week.

Key housing market takeaways for 400+ U.S. metro areas:

  • The median price of a home sold was $367,621, up 7% from the previous year. Prices were largely constant over the preceding four weeks.
  •  In Oakland, California, and the nearby city of San Francisco, home selling prices decreased by 3% and 2% respectively. The only other metro region to have a decrease in selling prices over the previous year was New Orleans (-2%)
  • To $379,725 the median asking price of newly listed properties jumped 9% over the previous year. That is a 1% decline over the preceding four weeks.
  • At the current mortgage rate of 6.92%, the average monthly mortgage payment for a property with the median asking price reached a new high of $2,559. That’s up from a recent low of $2,210 during the four weeks that ended August 14 and up 51% from $1,698 a year earlier, when mortgage rates were 3.05%.
  • New listings of houses for sale declined nearly 2% from the previous four-week period, and they were down 19% from a year earlier. 
  •  Pending home sales were down 28% year over year, the greatest decline since May 2020.
  • The number of residences that were actively advertised for sale at any given time throughout the period decreased by 1% from the previous four weeks. They improved by 3% over the previous year.
  •  The number of current listings divided by closed sales, a gauge of the balance between supply and demand, was 2.9 months, which is close to the highest level since July 2020.
  • Within the first two weeks of being on the market, 35% of properties that were under a contract received an accepted offer, up marginally from the preceding four weeks but down from 40% a year earlier.
  • Within one week of going on the market, 24% of properties that were under a contract received an accepted offer, up marginally from the previous four weeks but down from 28% a year earlier.
  • Homes that sold were on the market for a median of 33 days, which is a significant increase from the 25 days it took to sell them a year earlier and from the record-low 17 days in May and early June. 
  • The percentage of properties selling over list price fell to 30%, the lowest level since August 2020, from 45% a year earlier.
  •  Each week, a record high of 7.9% of the residences listed for sale had a price decrease, up from 4% the previous year.
  • The average sale-to-list price ratio, which gauges how closely properties are selling to their asking prices, dropped to 99% from 100.6% a year earlier, the lowest level since August 2020.
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