Seasonally adjusted new listings of homes for sale fell 8 percent from July to August to their lowest level since May 2020, according to a Redfin report.
Mortgage rates climbed from 5 percent at the beginning of August to 6 percent by the end of the month, pushing many homebuyers out of the market. The decrease in demand gave the buyers who were left some additional negotiating power and softened home prices a bit but caused many potential homesellers to hold off on listing.
“When mortgage rates were below 3 percent, sales and home prices soared. The market was like a game of musical chairs with buyers vying for too few homes,” Redfin Chief Economist Daryl Fairweather said in a release. “As mortgage rates approached 6 percent, almost everyone left the party. Now the market is more like a middle school dance where a small number of buyers and sellers are pairing up during a slow song.”
While we may be in a housing recession, the slowdown in sales is not a sign of a bubble bursting, Fairweather said.
“The bottom line is that homeowners don’t need to sell in this environment. They locked in rock-bottom mortgage rates last year and are sitting on piles of equity,” Fairweather said. “The jobs market remains very strong, so there’s little risk that mortgage delinquencies or foreclosures will rise significantly. It would take a severe — not soft — recession to send homeowners into distress. We will have to wait and see if the broader economy steers towards normalcy or recession in the upcoming months.”
Indianapolis, Grand Rapids, Mich., and Rochester, N.Y., were the fastest markets in August, with half of all homes pending sale in just eight days. Albany, N.Y., and Omaha, Neb., were the next fastest markets with nine and 10 median days on market.
The most competitive market was Rochester, N.Y., where 73 percent of homes sold above list price, followed by 72.4 percent in Buffalo, N.Y., 65.8 percent in Newark, N.J., 65.2 percent in Hartford, Conn., and 62.8 percent in Worcester, Mass.
Cape Coral, Fla., had the nation’s highest price growth, rising 20.6 percent since last year to $392,000. Knoxville, Tenn., had the second-highest growth at 20 percent year-over-year, followed by Tampa, Fla. (19.7 percent), North Port, Fla. (19.5 percent), and West Palm Beach, Fla. (19.2 percent).
Four metros saw year-over-year price declines in August including San Francisco (-7.3 percent), Oakland, Calif. (-3.2 percent), Baton Rouge, La. (-1.1 percent), and Honolulu (-0.6 percent).
No metro areas had year-over-year sales growth in August. The smallest declines were in Dayton, Ohio, (down 1.4 percent), followed by Greenville, S.C. (down 2.7 percent) and Rochester, N.Y. (down 3.7 percent).
Las Vegas saw the largest decline in sales since last year, falling 37.2 percent. Home sales in San Jose, Calif., declined by 33.8 percent and Phoenix dropped 31.9 percent.
North Port, Fla., had the highest increase in the number of homes for sale, up 51.2 percent year-over-year, followed by Austin, Texas (39.5 percent) and Nashville, Tenn. (38 percent).
Allentown, Pa., had the largest decrease in overall active listings, falling 44.5 percent since last August. Bridgeport, Conn. (-29.7 percent), Hartford, Conn., (-27 percent), and Montgomery County, Pa. (-26.8 percent) also saw far fewer homes available on the market than a year