Inflation and high mortgage rates are impacting potential homebuyers which means fewer sales, more supply and a drop in home prices.
According to a new Redfin report, during the four weeks ended July 10, the median sales price of a home in the U.S. fell 0.7% from June’s record-breaking peak. And that isn’t all. Asking prices also fell, down 3% from their May peak as the number homes on the market dropping prices also hit another high.
All that means more availability for those in the market for a new home.
The supply of homes for sale increased for the first time since August 2019 as pending sales continued to fall. The report attributes these changes to buyers reaching their limit on the cost of not just homes or mortgages, but food, transportation and energy
“Inflation and high mortgage rates are taking a bite out of homebuyer budgets,” said Redfin chief economist Daryl Fairweather. “Few people are able to afford homes costing 50% more than just two years ago in some areas, so homes are beginning to pile up on the market. As a result, prices are starting to come down from their all-time highs. We expect this environment of reduced competition and declining home prices to continue for at least the next several months.”
Redfin found fewer Google searches for “homes for sale” during the week ended July 9, down 75% from last year. Its Homebuyer Demand Index, which measures requests for tours and other services, fell 18% year over year during the week ended July 10.
Additionally, mortgage applications fell 11% from last year as the 30-year mortgage rate rose to 5.51% for the week ended July 14, down from 2022’s high of 5.81% but up from 3.11% at the beginning of the year.
In the four weeks ended July 10, active listings rose 1.3% year over year, the largest increase since August 2019. The median asking price rose 14% from 2021 to $397,475, down 2.8% from May 2022’s all-time high. Meanwhile, the median sale price increased 12% year over year to $393,449, down 0.7% from the June 19 peak. Year-over-year growth fell 16% from March’s peak, according to the report.
New listings were down 1.7% from last year, while active listings rose 1.3% year over year — the largest increase since August 2019.
Forty-three percent of homes that went under contract had an offer within the first two weeks, down from 47% last year, and 51% of homes sold above list price, down from 54% last year.
The report also noted the monthly mortgage payment on a median asking-price home was $2,387 at the current 5.51% mortgage rate. That was up 44% from last year’s $1,663 when mortgage rates were 2.88%, down from the June 12 peak of $2,487.