New listings fell 12% during the four-week period ending August 7, the largest YOY decline since June 2020, according to recent Redfin data.
Higher mortgage rates are keeping some Americans in their homes longer than they normally would be. Some homeowners are experiencing what Redfin calls “rate lock-in,” a fear of putting their home up for sale due to a low rate they nabbed during the pandemic.
Others are realizing they won’t get an offer over listing price on-demand like they could last year.
“Buyers are backing off due to rising housing costs and sellers are holding back because they realize they won’t get the bidding war they would have gotten six months ago,” said Redfin Deputy Chief Economist Taylor Marr.
“The good news is this is bringing balance to the market. If mortgage rates resume their downward trajectory, more buyers and sellers could get back in the game.”
But housing supply is still increasing overall, indicating that homebuyers are still backing out of the market at a higher rate than sellers. The number of homes for sale increased 4% YOY.
Pending home sales are also down 16% YOY, and fewer people searched for “homes for sale” on Google In July. Searches during the week ending August 6 were down 23% from the same time last year, but up 12% from late May.
Buyers are tepidly making their way back to the market as well as home price appreciation begins to slow and bidding wars cool off. Redfin’s Homebuyer Demand Index was down 9% YOY during the week ending August 7, but is up 17% from the end of June.
The median home sale price was $379,089, up 8% YOY but down 4.1% from their June high of $395,500.
The monthly mortgage payment on a median asking price home hit $2,290, however, up 37% YOY and down only slightly from its June peak of $2,464.
Sellers need to realign their expectations of the housing market now that many potential buyers have been pushed out by rising prices.
“Sellers could do no wrong over the past two years and have become overconfident. They could take the price their neighbor just got, bump it up 5%, and still have a line out the door. But with the surge in mortgage rates, those days are over,” James McGrath, a real estate broker and co-founder of New York-based real estate brokerage Yoreevo, told Realtor Magazine.
“Only after sitting on the market for a few months do they acknowledge their expectations may need to come down.”