BAM’s Key Details: 

  • A new Redfin Report shows record highs in deal cancellations and home price cuts
  • A record year-over-year drop in pending home sales (32.1%) is the largest on record
  • The lock-in effect has more would-be sellers (who don’t need to move) staying put

A new Redfin report shows a record drop in pending home sales as price cuts and deal cancellations hit record highs. 

The 32.1% year-over-year drop in pending home sales last month is the largest drop since at least 2013, which is as far back as Redfin’s records go. 

Meanwhile, almost 60,000 home purchase agreements collapsed—a record 17.9% of homes under contract. And nearly a quarter (23.9%) of homes for sale experienced a price cut, twice the rate of a year earlier. 

Here’s what you need to know. 

The lock-in effect brings new listings to a record low

Higher mortgage rates have many would-be sellers (who don’t need to move) staying put, thanks to the lock-in effect. The average rate for a 30-year fixed mortgage was 6.9% in October, 3.83% higher than a year earlier—the biggest year-over-year increase of any month since 1981. 

Those rates contributed to a 24% year-over-year decline in new listings—the steepest drop on record except for April 2020, with the onset of the pandemic.  

The Fed’s actions to curb inflation are causing the housing market to slow at a pace not seen since the financial crisis. There are already early but promising signs that inflation is cooling, which caused mortgage rates to drop last week. If that progress continues, buyers who recently backed out of deals may return to the market and sellers may be less inclined to slash their prices.

Chen Zhao

Redfin Economics Research Lead

Less competition and more days on market lead to price cuts

While the median home sale price dropped 1.4% month over month—the biggest slowdown for any October since 2012—it’s up 4.9% year-over-year. 

As homes linger on the market and competition dwindles, prices may ease a bit more. Homes that sold in October spent a median of 35 days on the market, up from 21 days a year earlier. 

Also, less than half (44.6%) of offers submitted by Redfin agents in October faced competition—compared to more than two-thirds (67.3%) a year earlier. 

Metro-level highlights

Home prices fell year-over-year in five U.S. metros (four of which are in California):

  • San Francisco: -4.5%
  • Lake County, IL: -3.5%
  • San Jose, CA: -1.6%
  • Oakland, CA: -1.6%
  • Stockton, CA: -0.2%

The following metros had the largest share of homes with a price drop: 

  • Boise, ID: 68.7%
  • Denver: 56.8%
  • Indianapolis: 54.7%
  • Salt Lake City: 54.7%
  • Tacoma, WA: 52.5%

Raleigh, NC, Phoenix, Austin, San Antonio, and Jacksonville, FL, saw the biggest year-over-year upticks in shares of homes with a price drop. 

Pending home sales dropped the most in—

  • Allentown, PA: -54.9%
  • Greensboro, NC: -50.4%
  • Honolulu: -47.3%
  • Salt Lake City: -46%
  • Jacksonville, FL: -45.9%

The number of homes sold dropped the most in—

  • Salt Lake City: -47.6%
  • Stockton, CA: -45.4%
  • Cape Coral: -45.3%
  • Las Vegas: -43.7%
  • San Diego: -41.5%

Metros with the biggest share of home sales falling through—

  • Jacksonville, FL: 30.6% (706 home purchase agreements)
  • Tampa: 26.7%
  • San Antonio: 26.6%
  • Atlanta: 25.2%
  • Las Vegas: 25.1%

New listings dropped the most in—

  • Cape Coral: -50.8%
  • Boise: -49.8%
  • Greensboro: -46.3%
  • Allentown: -42.1%
  • Baton Rouge: -39.3%

Active listings dropped the most in—

  • Hartford, CT: -32.6%
  • Milwaukee: -29.3%
  • Greensboro: -27.8%
  • Bridgeport, CT: -27.6%
  • Allentown: -25.8%

Time on the market was highest for—

  • Chicago: 61 median days on market
  • Honolulu: 59
  • West Palm Beach, FL: 58
  • New York: 57
  • Lake County, IL: 56

Metros with the lowest share of homes selling above list price—

  • North Port, FL: 12.9%
  • Cape Coral: 13.5%
  • Phoenix: 13.6%
  • West Palm Beach: 13.9%
  • Boise: 14%

Metros with the lowest bidding war rates—

  • Nashville: 11.1%
  • Colorado Springs, CO: 11.1%
  • Phoenix: 22.1%
  • Orlando, FL: 23.2%
  • Riverside, CA: 24%

For more highlights, check out the full Redfin report.

Top takeaways for real estate agents

If you work in a metro with a higher-than-average rate of price cuts and deal cancellations, you know your buyer clients have more bargaining power. Help them make the most of it while steering them toward a mortgage they can truly afford. 

Meanwhile, help your seller clients understand the landscape so they can price their homes competitively to attract more buyers. 

If you serve a community with a lower-than-average rate of price drops and cancellations, help all your clients understand what it will take to get a deal that benefits both parties. 

Be the agent who knows and shares the data your clients need to make informed decisions—and who cares enough to help them avoid a deal that would hurt them in the long run.