Home sellers are slashing their asking prices at a record clip as surging mortgage rates drive a downturn in the US housing market, according to a recent report from real estate firm Redfin.
About 7.9% of home listings reported price drops during the four-week period ending Oct. 9, according to a rolling average compiled by Redfin. That figure marked a record high and a significant uptick compared to the same period last year, when just 4% of listings reported price cuts.
“Prospective homebuyers and sellers barely had time to get used to 5.5% mortgage rates over the summer before they rose to nearly 7% this month,” said Redfin Deputy Chief Economist Taylor Marr.
“The second sharp rate increase this year, together with nerves about inflation and the direction of the economy, is dragging home-sale activity down further than it was over the summer and pushing homebuyer sentiment down near its all-time low,” Marr added.
Buying activity in the once red-hot US housing market has considerably slowed as higher mortgage rates make it more difficult to afford homes. A 30-year fixed-rate mortgage averaged 6.92% last week – more than double the rate for the same week one year earlier, according to Freddie Mac.
Based on the current median home asking price and the 6.92% average long-term mortgage rate, buyers face a record-high monthly mortgage payment of $2,559, Redfin’s calculations showed.
Mortgage payments are 51% more expensive than they were at this time last year, when buyers could expect to pay $1,698 per month on a 3.05% mortgage rate.
The number of pending home sales is down 28% compared to last year – the sharpest rate of decline since the thick of the COVID-19 pandemic in May 2020.
The median asking price of newly listed homes is down 1% over the last four weeks, though it is still up 9% to $379,725 over the last year.
Redfin generated its report based on data derived from more than 400 US metro areas.
Mortgage rates have surged as the Federal Reserve raises its benchmark interest rate to combat inflation. While mortgage rates aren’t directly influenced by the Fed’s benchmark, they tend to move higher as the central bank tightens monetary policy.
As The Post reported, home prices have begun to sharply decline in some markets.
The median US home price fell 0.77% from June to July, according to Black Knight’s July Mortgage Monitor report. That figure was the largest month-over-month decline in home values since January 2011.