Homebuyer Demand Falls In Its Largest Annual Decline Since The Pandemic Began

Soaring interest rates pushed homebuyer demand down in its largest annual decline in more than two years, Redfin reported.

Redfin’s Homebuyer Demand Index was down 16% YOY, its largest drop since April 2020, in response to lagging inventory and skyrocketing mortgage rates.

Last week, rates jumped a full half-point in the largest one-week increase in the history of Freddie Mac’s weekly rate survey, which dates back to 1987. This week they’re up to 5.81%.

At the same time, pending home sales were down 10% YOY, the largest decline since May 2020.

Home prices are moderating slightly, but still elevated. The average size of a purchase loan application was $420,000, down from a peak of $460,000. In 2019, the average loan size was just over $285,000.

“With home prices still at record highs, the affordability crisis has been dialed up to an 11 out of 10,” said Redfin chief economist Daryl Fairweather.

Home sellers have responded to the rapid market shift by reducing their asking prices, but not by nearly enough to entice worried buyers watching mortgage rates soar.

“Many home sellers have it stuck in their head that homes are selling a certain amount above asking, or that they can under-price their home to try to generate a bidding war, but that strategy isn’t working anymore,” said Boston Redfin real estate agent Robin Spangenberg. 

“High mortgage rates have kicked a lot of buyers right out of the market. This means sellers need to price their home at whatever they are okay walking away with, because they might only get one or two offers now.”