With mortgage rates at a 20-year high and inflation driving up other costs, the time on market for homes has doubled since spring.
And, according to the Mortgage Bankers Association, purchase mortgage applications have hit their lowest level in 25 years.
A new Redfin report shows pending home sales and new listings both experiencing their steepest year-over-year declines since the beginning of the pandemic.
As more buyers wait for prices and mortgage rates to go down, sellers are either backing off, cutting their prices, or making other concessions that would have been unnecessary at the beginning of the year.
Time on market has doubled since spring
As of October 16th, homes that sold spent a median of 34 days on the market before the seller accepted an offer. That’s more than a full week longer than the 26 days from a year earlier—and double the record low of 17 days from May and early June this year.
The number of days homes spend on the market has steadily increased since June. In mid-October, 35% of listed homes had an accepted offer within two weeks of going under contract—roughly the same as the previous four-week period but down 4% from a year earlier.
Also, 23% of homes on the market had an accepted offer within one week—likewise little changed from the previous four-week period but down 5% from a year earlier.
Pending home sales and new listings near early pandemic levels
Sales are taking more of a hit than listings. Sellers are still having to adjust their expectations of what buyers in today’s market are willing and able to pay with mortgage rates around 7%.
A record share of them are now making cuts to their asking price. And the average home is now selling for 1% under the final asking price.
For the four-week period ending October 16th, pending home sales were down 32% compared to a year ago—the biggest decline since April 2020.
New listings were down 19% year-over-year—the biggest drop since May 2020.
Mortgage rates at a 20-year high
For the week ending October 20th, 30-year fixed mortgage rates rose to a 20-year high of 6.94% — slightly higher than last week. With rates that high, buyers and sellers are holding off unless waiting is not an option.
Chen Zhao, Redfin Economics Research Lead, highlighted the effects of these rates on buyers and sellers alike, with some tips for both.
With rates sitting above 6.5% for three weeks and no indication they’ll come down before the end of the year, people are only buying and selling homes if they need to. Prospective buyers are waiting for prices and/or mortgage rates to come down and sellers want to squeeze as much money out of their sale as possible. Homes will eventually sell, but it may take a few months, and sellers need to meet buyers where they are. That means lower prices and negotiations, including things like giving buyers a credit to buy down their mortgage rate and paying for home repairs. Prospective sellers may also consider renting out their home for a few months until demand recovers.
Since cooling buyer demand has put added pressure on rentals, adding more properties to the rental market could help slow rent growth and help prospective buyers save more for their future down payments—while also providing additional income for sellers.
Purchase mortgage applications and homebuyer demand
Buyer activity, in general, is slipping. Redfin’s Homebuyer Demand Index has dropped 31% year-over-year to its lowest point since May 2020.
That decline is reflected in the following indicators of homebuying activity:
- Google searches on “homes for sale” were down 32% year over year for the week ending October 15.
- Touring activity declined 25% from the beginning of 2022, as of October 16. At the same time last year, touring activity was up 8%, according to ShowingTime.
- Purchase mortgage applications dropped 4.5% week over week and 38% year over year for the week ending October 14—reaching their lowest level since 1997.
Top takeaways for real estate agents
With more buyers holding off (or priced out of the market), and more homes selling below the asking price, buyers forging ahead stand a better chance of getting the homes they want at a reduced price.
This is a great time for buyers to ask for discounts, concessions, and seller-funded home repairs. And sellers who take the long view and approach negotiations with an open mind can still come away with a deal they’re happy with.
This is where you come in as an agent, with data ready to support your client and help them negotiate a deal they’ll have zero reason to regret, even if it’s not one for the history books.
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