Biggest drop in "at least seven years", according to real estate brokerage.
Pending home sales have fallen by the biggest level in at least seven years (35%), heralding a “serious correction” of the housing market, according to Redfin deputy chief economist, Taylor Marr.
The analysis shows that fewer homes were pending sale than during any October since at least 2015, when real estate brokerage Redfin began weekly housing market records.
A pending sale is when the seller has received and accepted an offer on their home, although the deal has not yet been finalized and cannot be considered as sold.
Marr said: “Until this month, the pullback in the housing market could be described as something of a return to pre-pandemic conditions before sub-3% mortgage rates ignited a homebuying frenzy in 2020 and 2021.
“But now both mortgage purchase applications and pending sales are below 2018 levels. A four-year setback is a serious correction. With mortgage rates still elevated, we are in for further sales declines, but those should eventually bring price relief to those who need to move this winter.”
Pending sales fell the most from a year ago in Los Angeles (-59%), Las Vegas (-56%), Miami (-50%), Seattle (-50%), Jacksonville (-48%), and Portland (-46%).
Quoted by Redfin, Sacramento real estate agent Michael Cendejas compared the current, high interest-induced slump to the spring, when buyers “had to race and wager over homes that flew off the market within a week”.
He said: “Today, many homes are staying on the market for a month or two. While mortgage rates are much higher now, buyers have the opportunity to negotiate. We’ve gotten sellers to agree to a lower price and to provide a credit, which enables the buyer to buy down their mortgage rate to below 6%.”
Redfin’s data also shows that home-sale prices fell from a year earlier in six US metro areas - San Francisco, Lake County, Oakland and San Jose in California, and Philadelphia and Frederick in Maryland.
The data comes the same week that 30-year mortgage rates rose to 7.08% for the week ending October 27 – the highest since 2002.
Since the beginning of the year, rates have more than doubled as the Federal Reserve grapples to control soaring inflation, which currently stands at 8.2%.
Redfin’s data echoes the findings of the National Association of Realtors (NAR) for August, which showed that pending home sales fell for the seventh time this year and to the lowest level since 2011, confirming the housing market’s downturn amid high borrowing costs, which are edging prospective buyers out.
Homebuying indicators According to Redfin, the leading indicators of homebuying activity also include collating data from ‘homes for sale’ searches on Google, which showed that they were down 28% from a year earlier.
The Redfin Homebuyer Demand Index—a measure of requests for home tours and other home-buying services from Redfin agents— fell 11% over the last month to its lowest point since May 2020.
In addition, touring activity for most of October plummeted 27% from the start of the year, compared to a 7% increase at the same time last year, according to home tour technology company, ShowingTime.
Mortgage purchase applications were also down 42% from a year earlier.
Homes that sold were on the market for a median of 34 days, up a full week from 27 days a year earlier.
Regarding the percentage of homes sold above list price, this was 29% – down from 44% a year earlier and the lowest since the pre-pandemic level set in February 2021.
On average, a record 7.9% of homes for sale each week had a price drop, up from 3.8% a year earlier.