Home sales took a beating last month as both sales and listings had their largest drops ever except for the early months of the pandemic.
A new Redfin report found the number of homes sold in September fell 25% from last year, while new listings fell 22%. The only other time the market saw such change was at the beginning of the pandemic.
Redfin economics research lead Chen Zhao said the U.S. housing market is at another standstill, but the driving forces are completely different from those that triggered the drop at the start of the pandemic.
“This time, demand is slumping due to surging mortgage rates, but prices are being propped up by inflation and a drop in the number of people putting their homes up for sale,” Zhao said. “Many Americans are staying put because they already relocated and scored a rock-bottom mortgage rate during the pandemic, so they have little incentive to move today.”
Month over month, the median home sale price was down 0.5% but still rose 8% from last year to $403,797.
The report cites mortgage rates, which have reached their highest level in nearly two decades, as the major factor for homebuyers backing away from the market. Those rates are driving payments up more than 50% from last year. Sellers are also holding off because they don’t want to lose the low mortgage rates they already locked in. Both factors are causing more deals to fail and a big decline in homebuyer competition, according to the report.
Redfin found 60,000 home-purchase agreements were canceled in September, which was 17% of homes that went under contract that month, the highest percentage on record except for March 2020. Homebuying competition also took a significant hit, with only 46% of offers facing competition.