Real estate brokerage Redfin on Thursday released a new report that shows the U.S. housing market activity is slowing down, with the pending home sales and new listings dropping to year over year lows of 32% and 19%, respectively.
Per the report, home sales and new listings during the four-week period ending October 16 dropped to levels that were roughly on par with April 2020, the start of the pandemic.
Redfin’s Deputy Chief Economist Taylor Marr said that issues with weak demand and having to give up their own low mortgage rates have deterred homeowners from listing their homes.
Sales are dropping more than listings, according to the report, as sellers have struggled to adjust asking prices enough to capture buyers who are willing and able to purchase a home when mortgage rates are hovering near 7%.
“With rates sitting above 6.5% for three weeks and no indication they’ll come down before the end of the year, people are only buying and selling homes if they need to,” Chen Zhao, Redfin economics research lead, said in a statement. “Prospective buyers are waiting for prices and/or mortgage rates to come down and sellers want to squeeze as much money out of their sale as possible. Homes will eventually sell, but it may take a few months, and sellers need to meet buyers where they are.”
In turn, it is taking twice as long to sell homes as it did in the spring.
Per the report, homes are now sitting on the market for a median of 34 days, up from the record low of 17 days set in May and early June. The typical time on market has been steadily increasing since June.
Nearly 35% of sellers with homes under contract now accept an offer within two weeks of the home being on the market, down by 39% compared to 2021. About 23% of sellers accepted an offer within a week, a decline of 28% compared to last year.
Active listings also increased by 5% year over year, according to the report. Last month, Redfin reported that new listings dropped by 20% during the four-week period ending September 18 compared to the year prior. That marked the largest yearly decline since May 2020, when the pandemic “froze the housing market in place.”
Redfin’s data also shows that the months of supply, which is a measure of the balance between supply and demand, has increased to a little more than three months, marking the highest level since June 2020.
A record share of sellers are also lowering the asking price on their homes, per the report, with the typical home now selling for 1% less than its final asking price – the biggest discount since August 2020. On average, about 7.9% of the homes for sale had a price drop, up from 3.9% compared to 2021.
In particular, the report highlights three U.S. metros that have experienced significant price declines compared to 2021: Oakland, which saw a 4% decline, San Francisco, which saw prices fall by 2%, and Philadelphia, which experienced a price decline of 1% year over year.
But while the data shows that sellers are lowering their asking prices, Redfin’s report also notes that the median asking price of newly listed homes has increased to $378,225, up by 8% YoY.
Meanwhile, the monthly mortgage payment on a home purchased the median asking price with a 6.94% mortgage rate reached a record high of $2,552. That is a 50% increase from 2021, when the average rate was 3.01% and the average monthly mortgage payment was $1,704.
In addition, the report shows that touring activity has dropped by 25% compared to an increase of 8% in October 2021. Mortgage purchase applications have also dropped to a rate of 4.5%, down by 38% from 2021.
Uncertainty about the market is also looming, according to Zhao, as there is no indication of mortgage rates will drop before the close of 2022.
This new report comes on the heels of a report released last week by Redfin that found the housing market has been declining due to rising inflation and mortgage rates that currently hover near 7% — a 20-year high.
Given the current market conditions, Zhao said it may take a few months for sellers and buyers to reach parity in agreements.
“That means lower prices and negotiations, including things like giving buyers a credit to buy down their mortgage rate and paying for home repairs,” she said.
Redfin recently launched in Wilmington, North Carolina and Green Bay, Wisconsin to establish its presence in coastal North Carolina and strengthen in areas of Charlotte and Raleigh-Durham.