Rising mortgage rates, booming home prices and scant inventory are pushing homebuyers to quicken their plans, according to Redfin’s latest market report.
In the wake of rising mortgage rates, homebuyers are racing to seal the deal on a scant number of listings before another economic shift knocks them out of the market. As a result, the typical home listed between April 8 and May 8 sold within a record-smashing 15 days — a pace that Redfin said on Friday could slow in the coming months.
“Rising mortgage rates have taken a notable bite out of demand,” Redfin Chief Economist Daryl Fairweather said. “But still, homebuyers who remain in the market are facing stiff competition, especially for the most desirable homes.”
Due to the Federal Reserve’s drastic rate hike to temper inflation, the typical homebuyer’s monthly mortgage payment rose 44 percent to a record-high of $2,427. Thirty-year fixed-rate mortgages have risen more than two full percentage points from Jan. 3 (3.409 percent) to May 6 (5.593 percent), an Inman article said on Wednesday.
Although rates have dropped to 5.490 percent, the pressure still is pushing early-stage buyers out of the market, as evidenced by the seven percent decline in home tours and other Redfin homebuying service requests.
“Fewer people searched for ‘homes for sale’ on Google — searches during the week ending May 7 were down 6 percent from a year earlier,” the report added. “Touring activity from the first week of January through May 8 was 30 percentage points behind the same period in 2021, according to home tour technology company ShowingTime.”
Salt Lake City-based agent Rin Barrett said the slight decline in buyer sentiment and activity has resulted in minute, but welcome, savings for buyers who are willing to be more flexible.
“We are seeing more price drops in recent weeks and homebuyers are starting to find some relief from competition,” he said in a statement. “People who have been looking for a long time and were consistently getting beat out by other buyers are starting to get their offers accepted.”
“They may be settling for a home that’s not in an ideal location or needs some work, but they’re happy because a few months ago even those seemed impossible to win,” he added.
Although buyers can nab a deal on a fixer-upper, Barrett and Fairweather said competition and home prices are still fierce for more turn-key properties. “Desirable homes in prime locations are still selling fast and for a premium, with no apparent slowdown so far,” Barrett said.
As the average sale-to-list price ratio, which measures how close homes are selling to their asking prices, continues its red-hot ascent to an all-time high of 102.8 percent, Fairweather said it will take much more for buyers to experience the relief they’ve spent years waiting for.
“Given the lack of homes for sale, it would take a much larger drop in demand for buyers to really feel like the market has truly turned in their favor,” she said.