U.S. home prices increased 4.5 percent in October, reaching a median of $297,200, according to Redfin.
Redfin found that 32 of the 71 largest metro areas saw home prices increase from September to October. The real estate brokerage suggested the monthly gain in October was because of the share of homes selling shifting slightly to more expensive areas rather than individual homes increasing in value.
In October, 31.3 percent of homes for sale had at least one price drop of more than 1 percent, Redfin found. It said that is the highest share of price drops on record since Redfin began tracking the metric in 2010, and 6.3 percent above last October’s level of 25 percent.
“An increase in interest rates effectively makes homebuying more expensive because buyers have to pay higher monthly mortgage payments even if the sticker price hasn’t changed,” Redfin Chief Economist Daryl Fairweather said in a release. “Some homebuyers are adjusting their price range down, and others are backing out of home-buying entirely – deciding that renting is a better deal.
“Sellers are now realizing buyer demand isn't what it used to be and are dropping their prices,” Fairweather added. “When buyers and sellers are on the same page, the market moves quickly, but since sellers were slow to react, we’ve seen a slowdown in the housing market.”
Redfin said the number of homes newly listed in October rose 5.4 percent year-over-year, but the number of completed home sales dropped 5.7 percent from 2017.
The biggest sales declines in October were in Seattle (-19.6 percent); San Diego (-15.7 percent); and Honolulu (-22.9 percent).
“Another factor we’re watching closely as we examine national housing market trends going into the end of the year is the devastation of the California wildfires,” Fairweather said. “While the fires are disrupting many Californians’ lives, and therefore any immediate homebuying plans, we’re already hearing from Redfin agents in Southern California that they expect homeowners and homebuyers to be resilient as they have in the face of past natural disasters, with renewed commitment to rebuilding and picking up where they left off with a home search.
“The fact is that rising mortgage rates and high home prices have a bigger long-term effect on the local housing market than the fires’ destruction.”