Residential Real Estate News
Home Buyers Retreat as Mortgage Rates Hit 6 Percent in U.S.
National broker Redfin reports that as U.S. mortgage rates reach 6 percent, seasonally-adjusted new listings of homes for sale have fallen 8% from July to August 2022 to their lowest level since May 2020, when the housing market was paralyzed by the onset of the COVID-19 pandemic. Prior to the pandemic, we hadn't seen so few homes hit the market since November 2012.
Mortgage rates climbed from 5% at the beginning of August to 6% by the end of the month, pushing many homebuyers out of the market. This sharp decrease in demand gave the buyers who were left some additional negotiating power and softened home prices a bit, but caused many potential home sellers to hold off on listing. As a result, the market as a whole is relatively balanced between buyers and sellers, but there's very little activity in terms of homes being listed and sold.
"When mortgage rates were below 3%, sales and home prices soared. The market was like a game of musical chairs with buyers vying for too few homes," said Redfin Chief Economist Daryl Fairweather. "As mortgage rates approached 6%, 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 went on to explain:
"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. 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."
U.S. Metro-Level Highlights Include:
Competition
- Indianapolis, Grand Rapids, MI and Rochester, NY were the fastest markets, with half of all homes pending sale in just 8 days. Albany, NY and Omaha, NE were the next fastest markets with 9 and 10 median days on market.
- The most competitive market in August was Rochester, NY where 73.0% of homes sold above list price, followed by 72.4% in Buffalo, NY, 65.8% in Newark, NJ, 65.2% in Hartford, CT, and 62.8% in Worcester, MA.
Prices
- Cape Coral, FL had the nation's highest price growth, rising 20.6% since last year to $392,000. Knoxville, TN had the second highest growth at 20% year-over-year price growth, followed by Tampa, FL (19.7%), North Port, FL (19.5%), and West Palm Beach, FL (19.2%).
- 4 metros saw year-over-year price declines in August including San Francisco (-7.3%), Oakland, CA (-3.2%), Baton Rouge, LA (-1.1%), and Honolulu (-0.6%).
Sales
- No metro areas had year-over-year sales growth in August. The smallest declines were in Dayton, OH, down 1.4%, followed by Greenville, SC, down 2.7%. Rochester, NY rounded out the top three with sales down 3.7% from a year ago.
- Las Vegas saw the largest decline in sales since last year, falling 37.2%. Home sales in San Jose, CA and Phoenix declined by 33.8% and 31.9%, respectively.
Inventory
- North Port, FL had the highest increase in the number of homes for sale, up 51.2% year over year, followed by Austin, TX (39.5%) and Nashville, TN (38.0%).
- Allentown, PA had the largest decrease in overall active listings, falling 44.5% since last August. Bridgeport, CT (-29.7%), Hartford, CT (-27.0%), and Montgomery County, PA (-26.8%) also saw far fewer homes available on the market than a year ago.
