BAM Key Details:
- On average, a record 2% of homes for sale were delisted each week during the 12 weeks ending November 20—up from 1.6% a year earlier
- Pandemic boomtowns saw the biggest increases in home delistings, with the highest shares in pricey West Coast metros
- Homebuyer demand is ticking up as mortgage rates dip
A new Redfin report shows a record 2% share of U.S. homes for sale delisted during the 12 week period ending November 20, compared to 1.6% a year earlier.
Buyers and sellers alike have backed away from more transactions, largely due to higher mortgage rates and housing costs.
But the news isn’t all bad, as another Redfin report highlights some encouraging developments as we head into 2023.
Reasons behind the delistings
Sellers are delisting their homes, often because no offers are coming or because the offers they are receiving are below their minimum asking price. Homebuyer demand has dropped significantly since the beginning of the year, thanks to rising mortgage rates and persistently high housing prices.
And while mortgage rates have dropped slightly since mid-November, the monthly mortgage payment on a median-priced home, if not doubled, is still 40% higher than it was a year ago.
Many homeowners with low rates locked down are disincentivized to move unless they can sell at a price that offsets the costs they face as buyers.
It’s also true some sellers still have unrealistic expectations of what buyers are willing to pay for their home. For some, by the time they realize they’ve set their price too high, their home has been on the market long enough to be considered stale.
Some sellers who’ve delisted their homes are waiting for spring, hoping the market will improve by then. Others are bracing for a recession and may put off the sale of their home for another year or possibly longer.
Pandemic boomtowns seeing the biggest rise in delistings
Markets that heated up during the pandemic are also seeing the biggest increase in delistings as high housing costs put a damper on buyer demand.
Sacramento, CA tops the list, with an average of 3.6% of active listings delisted per week during the 12 week period ending November 27—up 1.6% from a year ago and the biggest increase among the metros in Redfin’s analysis.
The top five markets with the biggest increase in delistings are:
- Sacramento, CA (3.6%)
- Austin, TX (1.5%)
- Seattle (1.4%)
- Phoenix (1.3%)
- Denver (1.2%)
Pricey West Coast metros have highest share of delistings
Along with having the biggest year-over-year increase in delistings, Sacramento also had the highest overall share, with an average of 3.6% of for-sale properties delisted per week during the 12 week period ending November 27.
Rounding out the top five with the highest share of delistings—
- Sacramento, CA (3.6%)
- San Francisco (3.4%)
- Oakland, CA (3.3%)
- Seattle (3.2%)
- San Jose, CA (3%)
One reason the priciest housing markets tend to have the highest number of delistings is that (relatively) fewer buyers can afford homes in these markets, improving the odds that sellers will receive little interest in their homes.
By contrast, Pittsburgh had the lowest share of home delistings at 1.3%, followed by—
- Cincinnati (1.4%)
- New Brunswick (1.5%)
- Newark (1.6%), and
- Virginia Beach, VA (1.6%)
Demand ticks up as mortgage rates dip
On December 1, the daily mortgage rate dipped to 6.29% — a full percentage point down from the peak of 7.29% it hit one month ago.
Mortgage purchase applications have risen 4% from one week ago, and Redfin’s Homebuyer Demand Index has gone up about 1.5% from a month ago.
Home price drops are becoming less frequent now that homebuyer demand is slowly ticking up as mortgage rates continue their downward trend. On average, just over 6% of for-sale homes each week—during the four weeks ending November 27—had a price drop, down from 7.2% just a week earlier and the lowest share since July.
There have been a handful of pieces of relatively good news for the housing market lately, but we’re far from out of the woods. Key indicators of homebuying demand will likely be teetering on a knife’s edge with every data release that comes out related to the Fed’s path to eventually bringing rates down. We’re likely past peak inflation, past peak mortgage rates and past the bottom for mortgage purchase applications. But there’s further cooling ahead for the housing market, as sales and prices have further to fall before buyers and sellers become comfortable with homebuying costs again.
Housing inventory reached 4.1 months of supply during the four weeks ending November 27—rising sharply from the previous four-week period and hitting the highest level since May 2020. So, even as new listings dropped by double digits, the supply of homes for sale posted a record year-over-year increase.
Leading indicators of homebuyer activity
Redfin’s latest report yielded the following data on homebuyer activity for the four weeks ending December 1, 2022:
- Mortgage purchase applications for the week ending November 25 were up 4% from a week earlier, seasonally adjusted (for the effect of Thanksgiving week), but down 41% from a year earlier.
- During the week ending November 26, Google searches on “homes for sale” were down roughly 40% from a year ago.
- Redfin’s Homebuyer Demand Index—a seasonally adjusted measure of requests for homebuying services (including home tours) from Redfin agents—rose 1.5% month-over-month during the four weeks ending November 27.
- Home touring activity, as of November 27, was down 53% from the start of 2022, compared to a 37% drop at the same time last year (according to ShowingTime). During this year’s Thanksgiving week, touring activity declined less than it has in years past.
Top takeaways for real estate agents
Use the data at your disposal to help your sellers price their homes competitively without digging a hole for themselves. And help your buyers understand their advantages in the current market so they can make the most of them.
Know the value you can bring to each of your clients—in any market. And hone your negotiating skills by learning from the best in the industry.