Housing market: Redfin says some home prices fall amid ‘softened’ demand

Early data shows signs that the national housing market may be starting to weaken as rising mortgage interest rates hit buyer demand.

But that doesn’t necessarily mean home prices are about to drop, especially in high-demand areas like Utah. Here, where a year-long housing shortage has pushed inventory extremely low, experts have said rising mortgage rates will likely only slow, not stop, home price increases and further reduce prices of potential buyers.

As the average loan rate for a 30-year fixed-rate mortgage hit 5% this week in the wake of upward adjustments from the Federal Reserve, homebuyer demand is starting to waver, and that’s pushing prompting more sellers to lower their sales prices, according to a new report published Thursday by the national real estate brokerage site Redfin.

First signs of a ‘softening’ real estate market

Although spring is typically a time when more sellers and buyers look to the market, new listings this spring fell 7% from a year ago as the median sales price rose to $397,747, up 14% year after year. That sent a typical homebuyer’s monthly payment up 35% year over year, from when mortgage rates were just above 3%, to an all-time high of $2,288, Redfin reported.

The Redfin report, which used data from more than 400 U.S. metropolitan areas over a four-week period ending Sunday, also cited several early indicators “that tell us demand is getting weaker at one time of year.” in which it normally arises”. Those include:

  • Fewer people searched for “homes for sale” earlier this month. Search engines for the first full week of April were down 3% from this time last year.
  • Redfin’s seasonally adjusted homebuyer demand index, a measure of requests for home tours and other home buying services from Redfin agents, also decreased 3% in the past four weeks, compared to a 5% increase over the same period in 2021.
  • Mortgage purchase applications fell 6% from a year ago, while the seasonally adjusted index rose 1% week-over-week for the week ending April 8.

Redfin is also watching “the accelerating proportion of home listings with price declines, which are rising at their fastest spring rate since at least 2015, another sign that demand isn’t meeting sellers’ expectations,” it said. The report.

How many vendors are lowering their prices?

Some other key findings in the report include:

  • On average, 3.2% of homes for sale each week saw a price drop, with 13% falling in price in the past four weeks. That’s an increase of 10% from the previous month and 9% from a year ago.
  • The share of price drop listings is increasing faster this time of year than it has been since 2015. Typically, during this time of year, the share of price drop homes decreases slightly month over month.
  • Active listings or the number of homes listed for sale fell 23% year over year.

“There really is a limit to homebuyer demand, although the market in recent years has made it seem endless,” Daryl Fairweather, chief economist at Redfin, said in the report.

“The sharp rise in mortgage rates is pushing more homebuyers out of the market, but it also appears to be deterring some homeowners from selling.”

But that doesn’t mean the US housing market is about to change drastically.

“With demand and supply falling, the market is not likely to change anytime soon from a seller’s market to a buyer’s market,” Fairweather said.

Bidding wars and lightning-fast sales continue

Despite these early signs of a housing market cooling, the Redfin report noted that the market still feels “as hot as ever for homebuyers” as homes continue to be snatched up at surprising speeds amid bidding wars and record price increases.

Sold homes were only on the market for an average of 18 days, up from 26 days a year earlier, according to the Redfin report.

In addition, 45% of the houses that were contracted found a buyer in a week, and the average house that sold was 2.4% higher than its sale price, the Redfin report indicated.

“If a house is on the market for more than a week, people start to wonder why or assume something is wrong with it,” Redfin Boston realtor James Gulden said in the report.

Bidding wars continue to add stiff competition, with 54% of homes sold above listing price, up 42% from the previous year and just shy of the all-time high recorded in July 2021, according to the report. Redfin.

But some buyers are getting tired of playing the game.

“Every offer I’ve written recently has been faced with multiple offers, but some people have finally gotten tired of all the competition and are pulling out,” Gulden said. “They are less and less willing to make a risky offer in a high-stress bidding war situation.”

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