Housing market slows down as high mortgage rates dig
Reduced competition, fewer sales and even some price drops by sellers are all indications that buyers and homeowners are reacting to higher mortgage rates, high prices and high inflation. Three reports from Redfin real estate brokerage demonstrate the cool-down in the national housing market.
May, traditionally one of the busiest months for home sales, saw a 3% decline in sales, compared with April, according to Redfin’s report. Sales were down 10.2% compared with May 2021.
Median sales prices continue to climb, up 14.8% nationally, compared with May 2021. No metro area saw a price decline in May, compared with the previous year, and some saw large price jumps. The median sales price rose 30.5% in North Port, Fla.; 28.1% in Tampa, Fla.; 26.8% in Las Vegas; 25.9% in Knoxville, Tenn.; and 25.8% in Orlando, Fla.
While demand for homes is declining, which makes competition less fierce, the number of listings is still down, according to Redfin. Active listings were 4.3% lower in May, compared with May 2021 and were down 0.7%, compared with April 2022.
Fewer buyers faced competing offers in May, when Redfin reported that 57.8% of buyers working with a Redfin agent were in a bidding war for a property. That represents the lowest share of offers facing competition since February 2021 and is down from 68.8% in May 2021. The percentage of offers facing competition has declined for four consecutive months.
Buyers face the most competition in Worcester, Mass., where 81.8% were in a bidding war in May, followed by Las Vegas (74.5%), Boston (72.6%), Dallas (72.3%) and Philadelphia (69.3%).
The metro areas with the lowest competition in May were Riverside, Calif. (41%); Providence, R.I. (45.3%); Olympia, Wash. (47.2%); Honolulu (47.8%); and Minneapolis (48.7%). In the D.C. region, 61.1% of buyers faced competition in May, compared with 70.6% one year ago.
Slowing demand means that some sellers decided to lower their sales price to get an offer or during negotiations, according to Redfin. On average, 22.4% of homes for sale during the four-week period that ended June 12 had a price drop, a record high for Redfin’s data, which dates back to the beginning of 2015.
The prime culprit for the slowing housing market is mortgage rates, which have risen quickly in recent months to rates not seen since 2008.