Homebuyer demand is starting to stabilize as October home sales posted the largest decline since 2015, according to a new Redfin report.
Areas across the country, like Las Vegas, Miami and Phoenix, which saw significant growth during the pandemic, had declines of 50%, the report found, as a record number of sellers dropped their home prices last month.
Redfin found several key measures indicating the stabilization of homebuyer demand, as mortgage rates fell slightly below 7% in the last week of October, including declines in Google searches for “homes for sale,” its Homebuyer Demand Index, mortgage applications and pending sales.
Redfin deputy chief economist Taylor Marr said this week that we’re seeing a light at the end of the tunnel from the Fed slowing the pace of interest rate hikes, but “the tunnel’s exit may be more dreadful than expected.”
“There is also a glimmer of hope in the data that buyers stopped leaving the market as mortgage rates leveled off this week, but we’re still deep in a market that is coping with the pains of higher mortgage rates,” Marr said. “Mortgage rates may take longer to come down than many have expected, which means housing trends could continue to worsen as the economy adjusts to higher rates. If last year’s housing market was as overheated as Chair Powell stated on Wednesday, then record growth in rates was like a bucket of water poured on the flames to bring it into balance. It may take some time for the smoke to clear to see where things stand next year.”
Redfin said its agents in the Midwest and Mountain West are seeing more activity from first-time and budget-restricted buyers, who have begun returning to the market while taking advantage of not having to rush to make a purchase and being more “choosy” about their decisions.
In the week ending Nov. 3, pending home sales fell 33% from last year, marking the largest decline since January 2015, yet for the week ending Oct. 30, they were up slightly from the previous week, marking the first increase in two months.
Mortgage rates fell to 6.95% in the week ending Nov. 3. Meanwhile, mortgage applications fell 1% during the week of Oct. 28, down just 1%, which the report noted was the smallest week-over-week decline in five weeks. Purchase applications were also down, falling 41% from last year.
Redfin found fewer Google searches for “homes for sale” during the week ended Oct. 29, down 32% from last year, but up a point from the week prior. Its Homebuyer Demand Index, which measures requests for tours and other services, was down 33% from last year.
In the four weeks ended Oct. 30, active listings rose 7.4% from last year and were up from 7.0% in the previous period, the largest increase in six weeks, while new listings fell 185 from last year.
The median asking price rose 7% from 2021 to $373,725 but was down 7% from its May record high of $399,975. Meanwhile, the median sale price increased 4% year over year to $360.861.
Thirty-four percent of homes that went under contract had an offer within the first two weeks, showing little change from the previous four weeks but down from 40% last year. Twenty-eight percent of homes sold above list price, down from 43% last year and the lowest since July 2020.
The report also noted the monthly mortgage payment on a median asking-price home was $2,524 at the current 6.95% mortgage rate. That was up 48% from last year’s $1,703 when mortgage rates were 3.09%, yet up from August’s low of $2,203.