HOUSTON – (By Dale King, Realty News Report) – What a difference a year makes – particularly in the homes sales arena.
A once-soaring sellers’ market that boasted record prices and unrivaled home purchase numbers has not simply stabilized, it has plunged at its fastest rate in seven years, says a new report from real estate brokerage Redfin.
Plunged at Fastest Rate in Seven Years
During the four weeks ending Oct. 23, the firm says, pending home sales in the U.S. fell 35 percent year over year. That represents the largest annual decline and the fewest homes under contract in any October since at least 2015, when Redfin’s weekly housing reports began.
“Until this month, the pullback in the housing market could be described as something of a return to pre-pandemic conditions before sub-3 percent mortgage rates ignited a homebuying frenzy in 2020 and 2021,” said Redfin Deputy Chief Economist Taylor Marr.
“But now, both mortgage purchase applications and pending sales are below 2018 levels,” he said. “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.”
Data from the Houston Association of Realtors last month offered the following assessment: “Houston home sales recorded their sixth consecutive monthly decline in September. New listings slipped for their third consecutive month. Inventory rose to its highest level since May of ’20. And home prices are finally showing signs of cooling.”
HAR blamed the slippage on “rising interest rates, elevated home prices and economic uncertainty.”
“Local [Houston] home sales first dipped in April,” say HAR figures. “The decline has accelerated as the year progressed. April 2022 sales were down 0.2 percent compared to April 2021. May sales were down 0.9 percent, June down 8.6 percent, July down 13.4 percent, August down 16.8 percent and September down 17.0 percent compared to the same month last year.”
Houston Pending Sales Lowest Since March 2021
“The trend shows no signs of abating,” HAR added. “Pending sales fell to their second-lowest level since March of ’21. Historically, sales peak in the early summer and begin to taper off in August. This suggests sales will likely continue to trend down through the remainder of the year.”
Housing Activity Slower Across Texas
Activity in the Texas housing market slowed in the third quarter this year, according to the 2022-Q3 Texas Quarterly Housing Report releasedby Texas Realtors. The 97,711 homes sold in Texas in the third quarter represents a 10% decline from the previous quarter and 15% from the third quarter of 2021. However, while the $345,000 median sales price dipped 3.6% lower than the second quarter this year, it is still 11.3% higher than the third quarter of 2021.
“We had two years of an unprecedented housing market,” said Russell Berry, chairman of Texas Realtors. “The number of homes being sold now is closer to sales numbers prior to the pandemic. While higher interest rates present a challenge for buyers, the good news is that buyers have more homes to choose from and are less likely to find themselves in a bidding war. Sellers may have to wait longer to get an offer, but home prices in many markets are still close to the all-time highs recorded earlier this year.”
Google Searches of “Homes for Sale” Decline
The Redfin report offers the following indicators of homebuying activity across the nation:
- For the week ending Oct. 27, 30-year mortgage rates rose to 7.08 percent.
- Fewer people searched for “homes for sale” on Google. Searches during the week ending October 22 were down 28 percent from a year earlier.
- Seasonally adjusted requests for home tours and other home-buying services from Redfin agents declined 11 percent in the past four weeks to their lowest point since May 2020.
- Touring activity as of Oct. 23 was down 27 percent from the start of the year, compared to a 7 percent increase at the same time last year, according to home tour technology company ShowingTime.
- Mortgage purchase applications during the week ending Oct. 21 were down 2 percent week over week, seasonally adjusted, to the lowest level since 2014. Purchase applications were down 42 percent from a year earlier.
Redfin said the median home sale price was $365,725, up 5 percent year over year, but down 7 percent from a record high of $392,250 in June.
Home-sale prices fell from a year earlier in six U.S. metro areas. Prices declined 5 percent year over year in San Francisco, 3 percent in Lake County, Ill., 2 percent in Oakland, Calif. and less than 1 percent in San Jose, Calif., Philadelphia and Frederick, Md.
Among metro areas with at least 500 pending sales during the period, pending sales fell the most from a year ago in Los Angeles (-59 percent), Las Vegas (-56 percent), Miami (-50 percent), Seattle (-50 percent), Jacksonville, Fla. (-48 percent) and Portland, Ore. (-46 percent).
Mortgage rate increases took a heavy toll, said Redfin. The monthly mortgage payment on the median-asking-price home climbed to a record $2,542 at the current 7.08 percent mortgage rate, up 48 percent from $1,712 a year earlier, when mortgage rates were 3.14 percent and up from a recent low of $2,187 during the four-week period ending Aug. 14.
A West Coast home seller cited some wiggle room in this area. “Every set of market conditions comes with its own tradeoffs,” said Sacramento Redfin real estate agent Michael Cendejas. “In the spring, buyers had to race and wager over homes that flew off the market within a week. Today, many homes are staying on the market for a month or two.”
“While mortgage rates are much higher now, buyers can negotiate,” he added. “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 percent.”
In addition, said the report:
- Active listings (the number of homes listed for sale at any point during the period) were 4 percent above a year earlier but fell 1 percent from the prior four-week period.
- Months of supply—a measure of the balance between supply and demand, calculated by dividing the number of active listings by closed sales—increased to 3.1 months, the highest level since June 2020.
- Also, 34 percent of homes that went under contract had an accepted offer within the first two weeks on the market, little changed from the prior four-week period but down from 40 percent a year earlier.
- The average sale-to-list price ratio, which measures how close homes are selling to their final asking prices, fell to 98.9 percent from 100.5 percent a year earlier. This was the lowest level since August 2020.
Nov 7, 2022 Realty News Report Copyright 2022
File: Real Estate Market Declines
Photo credit: Ralph Bivins, Realty News Report Copyright 2022
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