Buyers are still fleeing the market in droves despite signs of cooling, driven out by rising mortgage rates and economic uncertainty.
Home sales fell by 19.3% YOY in July, hitting their lowest level since the pandemic started, Redfin reported. It’s the biggest annual decline in U.S. home sales in more than a year.
Sales also fell 4.1% from June.
Redfin noted that while affordability challenges pushed some buyers out, others were concerned about the potential for home-value declines. Home price appreciation rose at its slowest pace since June 2020, up only 7.7%, and talk of price correction is everywhere.
Fewer homeowners put their homes on the market, too. New listings fell 13.5% YOY, the biggest decline in more than a year.
Sellers now risk getting less money for their homes than they would have gotten a year ago, making them reluctant to put their houses on the market.
“A look at active inventory trends shows that home listings were nearly twice as likely to have had a price cut in July 2022 compared to one year ago,” said Danielle Hale, Chief Economist at Realtor.com.
Rate lock-in is also keeping some potential sellers in their homes, as many people don’t want to lose the low mortgage rate they secured during the pandemic. About half of all homeowners have a rate under 4% and are disinclined to give it up.
“The buyers who are still in the game are finally getting a break from bidding wars, which means they can be picky,” said Raleigh, NC Redfin agent Pam Lewis.
“Three months ago, buyers were saying, ‘Get me a building with four walls and I’ll make it work.’ Now they have some choices. They don’t want a home if it doesn’t have the fenced-in yard or guest room on their wish list, and they want a $20,000 price reduction if a home has been on the market for more than a week. I’m telling buyers they’re not likely to see their property values decrease over time, but they may not appreciate as fast as homeowners have become accustomed to in the past few years.”
Andrew Berman of American Business Media, Alex Kutsishin, co-founder of Sales Boomerang (Which recently partnered with Mortgage Coach), and Jarrett Stanley, CMO of Southern Trust Mortgage recently hosted a National Mortgage Profession webinar called “Sink or Swim: The One Way To Stay Afloat in a Stormy Market” to offer advice to lenders.
They talked about the importance of technology and relationship building.
“Put customers first, build a foundation of best practices,” Stanley said. “And the market adjustments will have minimal impact.”