Sellers are adjusting their expectations in the wake of homebuyers’ declining purchase power, due to a combination of rising mortgage rates and weakened stock markets. The monthly mortgage payment on the median asking price home increased to $2,459 at the current 5.7% mortgage rate. This represents a 45% increase from a year ago, when mortgage rates were 2.98%.
A record-high share of home sellers also dropped their prices during the four-week period analyzed, according to Redfin. On average, 6.5% of homes for sale had a price drop, which is the highest share ever recorded by Redfin since it began tracking the metric in 2015. However, the share of homes selling above list price increased slightly year over year, from 53% in 2021 to 54% this year, but it is 2.5 percentage points lower than it was in mid-May 2022.
“Data on home-tours, offers and mortgage purchase applications suggest that homebuyers have noticed the shift in power and are no longer leaving the market in droves,” Daryl Fairweather, Redfin’s chief economist, said in a statement. “Buyers coming back will provide support to the housing market, but between now and the end of year I think the power will continue to shift towards buyers, resulting in mild price declines from month to month.”
Despite lower asking prices, the Redfin report highlighted multiple signs of slowing buyer demand, including the number of pending sales decreasing by 13% year over year, the largest decline since May 2020. During the week ending June 25, 7% fewer people searched “homes for sale” on Google than a year prior. In addition, home touring activity as of June 26, was down 3% from the start of the year, compared to a 24% increase a year ago, according to data from ShowingTime. In addition, in the metro areas analyzed, 46% of homes that went under contract had an accepted offer within the first two weeks on the market, down from 49% a year ago.
Alongside decreasing homebuying demand is the uptick in inventory. Redfin reported that the number of active listings fell just 8% year over year, which is the smallest decline since March 2020. Compared to the year prior, however, the number of newly listed homes for sale was down 7%.
Updated: Boston Real Estate Blog 2022