Home prices have fallen a bit in recent weeks thanks to increasing inventory and buyer sticker shock, but expectations of a cooling market may be premature. A new report from Redfin found that early homebuyer demand reached its highest point in at least three years during the four-week period ending September 19.
The report showed other housing market measures slowing at a normal rate for the end of summer. Pending sales fell 12% from their 2021 peak, and the number of homes selling above their list price fell. Time on market rose to 20 days.
Asking prices also rose 2.4%. While that’s typical for September, the number itself is not: the median asking price rose 11% year-over-year to $359,724, an all-time high.
Purchase loan applications are also steadily rising, up 2% this week on top of an 8% jump the week prior, according to MBA.
“The fact that homebuyer demand is setting new records as summer draws to a close leads me to believe that home prices have room to grow,” Redfin Chief Economist Daryl Fairweather said.
“This fall will be a litmus test for how hot the 2022 housing market will get. And it looks like we are heading into another unseasonably hot fall as ultra-low mortgage rates and employers’ remote-work policies mean Americans are still on the move.”
A Redfin migration report found that 30% of potential buyers are looking for homes outside their metros, down from 32% earlier in the year but still up compared to 26% at the beginning of the pandemic.
One variable that could still create housing market headwinds is interest rates. At the Fed’s September meeting, Chairman Jerome Powell signaled strongly that monetary easing is coming to an end.
In a research note, Amherst Pierpont’s chief economist Stephen Stanley wrote, “The forward guidance was pretty close to the most explicit that could realistically be expected.”
“The era of sub 3% mortgage rates may be behind us already by the end of this year,” added George Ratiu, manager of economic research at Realtor.com.
Here are some highlights from the report:
- The median home-sale price increased 13% year over year to $356,663.
- Pending home sales were up 6% year over year.
- New listings of homes for sale were down 6% from a year earlier. New listings have been below 2020 levels since the four-week period ending August 22.
- Active listings (the number of homes listed for sale at any point during the period) fell 21% from 2020.
- 46% of homes that went under contract had an accepted offer within the first two weeks on the market, above the 43% rate of a year earlier.
- 33% of homes that went under contract had an accepted offer within one week of hitting the market, up from 31% during the same period a year earlier.
- Homes that sold were on the market for a median of 20 days, up from the all-time low of 15 days seen in late June and July, and down from 32 days a year earlier.
- 49% of homes sold above list price, up from 34% a year earlier.
- On average, 4.9% of homes for sale each week had a price drop, up 0.8 percentage points from the same time in 2020, and the highest level since the four-week period ending October 13, 2019.
- The average sale-to-list price ratio, which measures how close homes are selling to their asking prices, decreased to 101.2%. In other words, the average home sold for 1.2% above its asking price.