Housing Market Report: Reduced Demand and Decreased Supply Result in Increased Prices

The median home-sale price in the United States experienced a notable 3% year-over-year increase during the four weeks ending on August 6th, marking the largest surge since November. Certain regions of the country, such as Miami and Milwaukee, witnessed double-digit price hikes.

Despite relatively subdued homebuying demand, prices continue to climb amidst the persistence of high mortgage rates, which currently hover around 7%, up from a 3% average in 2021 and a 5.3% average in 2022. Redfin’s Homebuyer Demand Index, a metric that gauges early-stage demand through requests for property tours and other buying services from Redfin agents, has declined by 5% compared to the previous year and has hit its lowest level since March. Additionally, mortgage purchase applications have seen a 27% drop from the previous year, reaching their lowest level since March as well.

The scarcity of housing inventory is a key driver behind the increasing prices, with the number of homes for sale declining by 18% in comparison to the previous year, representing the sharpest decrease since the beginning of 2022. Moreover, new listings have dropped by 16%, as homeowners opt to remain in their current properties to maintain their relatively low mortgage rates. It is important to note that part of the reason for the annual increase in prices is due to the fact that they were gradually declining from an all-time high at this time last year.

Spokane, WA Redfin Premier agent Brynn Rea commented, “There is a considerable demand for lower-priced single-family homes in our area, typically within the price range of $400,000 and below. Buyers are searching for deals to offset the impact of high mortgage rates. As a result, move-in ready and relatively affordable homes on the market are selling rapidly, often receiving multiple offers. However, the bidding wars we are witnessing today typically involve two or three offers, as opposed to the five to ten offers we saw a year and a half ago. Additionally, many higher-priced homes are struggling to sell due to the challenge of affording today’s monthly mortgage payments.”

On August 9th, the average 30-year fixed mortgage rate stood at 7.05%, slightly higher than the previous week but lower than the six-month high recorded three weeks earlier. During the week ending August 4th, mortgage-purchase applications declined by 3% compared to the previous week, with a notable decrease of 27% from the same period last year. The Redfin Homebuyer Demand Index, which measures requests for home tours and other homebuying services from Redfin agents, experienced a 6% decrease from the previous month, reaching its lowest level since March. Moreover, Google searches for “homes for sale” were down approximately 8% from the previous month and 11% from the previous year during the week ending August 5th. Contrarily, touring activity as of August 6th showed a 7% increase compared to the beginning of the year, demonstrating a clear contrast to the 5% decrease observed at the same time last year, according to home tour technology company ShowingTime.

The median home sale price experienced a 3% year-over-year increase, reaching $381,225, marking the most significant surge recorded since November. Miami led in price growth with a 12.6% increase, followed by Milwaukee (12.1%), West Palm Beach, FL (9.2%), Cincinnati (8.9%), and San Diego (8.6%). Conversely, 12 metro areas saw declines in home-sale prices, with Austin, TX (-10.6% YoY), San Francisco (-6.3%), Phoenix (-3.6%), Fort Worth, TX (-3%), and Las Vegas (-2.6%) encountering the most substantial drops.

Additionally, newly listed homes witnessed a 2.5% year-over-year increase in the median asking price, amounting to $386,748. A 6.9% mortgage rate led to a monthly mortgage payment of $2,602 for the median-priced home, representing a 1% decrease ($39) from the previous three weeks but an 18% increase from the prior year.

Moreover, pending home sales demonstrated a 13.2% year-over-year decline, continuing a 15-month trend of double-digit drops. Out of all the metro areas analyzed, Providence, RI (-28.9% YoY), Newark, NJ (-26.4%), Boston (-24.9%), Seattle (-24.5%), and Warren, MI (-24.3%) experienced the most significant declines. In contrast, Las Vegas saw a 1.9% increase, while Austin, TX, and West Palm Beach observed roughly 1% growth.

Notably, new listings of homes for sale experienced a substantial 16.5% year-over-year decline across all analyzed metro areas. Las Vegas (-37.5% YoY), Phoenix (-33.1%), Chicago (-26.7%), Oakland, CA (-25.3%), and New Brunswick, NJ (-24.3%) experienced the most substantial decreases.

Active listings, representing the number of homes available for sale during a specific period, decreased by 17.9% year-over-year, marking the most significant drop since February 2022. The number of active listings remained relatively stable compared to the previous month, which is typically when an increase is observed.

The market’s supply and demand balance, measured by months of supply, remained steady at 2.7 months, mirroring the previous year’s conditions. Typically, a balanced market is considered to have four to five months of supply, with a lower figure indicating seller’s market conditions.

An encouraging statistic revealed that 43.6% of homes that went under contract received an accepted offer within the first two weeks on the market, reflecting an increase from the previous year’s 41%. The median number of days homes spent on the market before being sold increased to 28 days, compared to 24 days in the previous year.

Lastly, 35.3% of homes sold above their final list price, showcasing a slight decrease from the previous year’s 42%. Furthermore, the average percentage of homes for sale each week that experienced a price drop decreased to 6.1%, down from 6.5% in the previous year.