The typical home is now taking longer to sell than during any period since the onset of the COVID-19 pandemic, and pending sales are at a record low, according to new reporting from Redfin.
However, online home searches and tour requests are ticking up. Redfin said those early signs of demand could translate into sales, especially as mortgage rates fall from their peak and inflation cools.
The typical home that sold during the four weeks ending Jan. 8 was on the market for 44 days, the longest timespan since April 2020, contributing to the biggest annual inventory increase on record. Pending home sales dropped 32 percent year-over-year to their lowest level on record, and mortgage-purchase applications dropped to their lowest level since 2014.
There are signs that early-stage demand is up. Redfin’s Homebuyer Demand Index posted a 6 percent increase over the last month, and Google searches for “homes for sale” are on the rise. Redfin attests that buyers are likely coming in from the sidelines because mortgage rates have dropped to 6.33 percent from their November peak of more than 7 percent, saving the typical homebuyer roughly $250 on monthly housing payments.
Buyers also may be encouraged by signs of improvement in the economy, with inflation easing in December for the sixth month in a row as wage growth softens.
“We’re entering 2023 with positive economic news: The latest consumer price index report confirms that the worst of inflation is behind us,” Redfin Deputy Chief Economist Taylor Marr said in a release. “That means the Fed is likely to continue easing its interest-rate increases, which should cause mortgage rates to continue gradually declining. This could bring back some homebuyers in the coming months. We’ve already seen an uptick in people initiating home searches. Although those house hunters haven’t yet turned into buyers, they may soon, given that monthly mortgage payments are notably down from their peak and the latest inflation and employment data lower the chances of a recession.”
Home prices fell year-over-year in half of metros
The typical home sold for $351,250 during the four weeks ending Jan. 8. That’s up 0.8 percent from a year earlier, but down about 10 percent from this past June’s peak.
Home-sale prices fell year-over-year in 20 of the 50 most populous metros. By comparison, 11 metros saw price declines a month earlier.
Prices fell 10.6 percent year-over-year in San Francisco, 5 percent in Seattle, 4.9 percent in San Jose, Calif. 4 percent in Austin, Texas, 3.8 percent in Detroit, 3.7 percent in Phoenix, 3.4 percent in Oakland, Calif., 3 percent in Boston, 3 percent in Los Angeles, 3 percent in Sacramento, Calif.,2.6 percent in San Diego and 2.5 percent in Chicago. They fell 2 percent or less in Portland, Ore., Anaheim, Calif., Riverside, Calif., Newark, N.J., New York, Pittsburgh, Las Vegas and Washington, D.C.
This marks the first time Las Vegas prices have dropped year-over-year since at least 2015. It’s the biggest year-over-year price drop in San Francisco, Seattle, Phoenix, Chicago, Boston, Portland and San Diego since at least 2015, according to Redfin.
Leading indicators of homebuying activity:
• For the week ending Jan. 12, 30-year mortgage rates declined from the week before to 6.33 percent. The daily average was 6.15 percent on Jan. 11.
• Mortgage-purchase applications during the week ending Jan. 6 declined 1 percent from a week earlier, seasonally adjusted, hitting their lowest level since 2014. Purchase applications were down 44 percent from a year earlier.
• The seasonally adjusted Redfin Homebuyer Demand Indexwas essentially flat from a week earlier and up 6 percent from a month earlier during the four weeks ending Jan. 8. It was down 29 percent from a year earlier.
• Google searches for “homes for sale” were up nearly 50 percent from their November low during the week ending Jan. 7, but down about 17 percent from a year earlier.
Key housing market takeaways for 400-plus U.S. metro areas:
• The median home sale price was $351,250, up 0.8 percent year-over-year.
• The median asking price of newly listed homes was $352,150, up 3.9 percent year-over-year.
• The monthly mortgage payment on the median-asking-price home was $2,263 at the current 6.33 percent mortgage rate. That’s roughly flat from a week earlier and down $244 from the October peak. Monthly mortgage payments are up 32.7 percent from a year ago.
• Pending home sales were down 31.7 percent year-over-year to the lowest level on record, the 12th straight period of pending sales declining more than 30 percent.
• Among the 50 most populous U.S. metros, pending sales fell the most in Las Vegas (-61.9 percent year-over-year), Jacksonville, Fla. (-57.4 percent), Phoenix (-56.9 percent), Austin, Texas (-55.3 percent) and Nashville (-50.8 percent).
• New listings of homes for sale fell 21.9 percent year-over-year.
• Active listings were up 20.7 percent from a year earlier, the biggest annual increase since at least 2015.
• Months of supply was 3.8 months, up from 3.4 months a week earlier and 1.9 months a year earlier.
• 27 percent of homes that went under contract had an accepted offer within the first two weeks on the market, down from 34 percent a year earlier.
• Homes that sold were on the market for a median of 44 days, the longest period since April 2020. That’s up nearly two weeks from 31 days a year earlier and the record low of 18 days set in May.
• 22 percent of homes sold above their final list price, down from 40 percent a year earlier and the lowest level since March 2020.
• On average, 4 percent of homes for sale each week had a price drop, down sharply from 5.7 percent a month earlier.
• The average sale-to-list price ratio fell to 97.9 percent from 100.1 percent a year earlier. That’s the lowest level since March 2020.