Mortgage rates reached a 20-year high this month, causing another hit to the already volatile housing market, according to a new Redfin report.
As mortgage rates creep toward 7%, pending home sales and new listings are declining more than they did over the summer, as the number of sellers dropping prices rose to its highest level on record, and the number of homes selling for over asking price dropped to its lowest since the start of the pandemic.
Redfin deputy chief economist Taylor Marr said prospective buyers and sellers barely had time to get used to the summer’s 5.5% mortgage rates before they rose to nearly 7% in October.
“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 said. “The combination is also unnerving for homeowners who don’t want to list their home when demand is weak or give up their own low mortgage rate.”
Mortgage rates rose to 6.9% in the week ending Oct. 13, the highest they’ve been since April 2002, as mortgage applications fell 2% week over week and were down 39% from last year.
Redfin found fewer Google searches for “homes for sale” during the week ended Oct. 8, down 35% from last year putting it on par with March 2020. Its Homebuyer Demand Index, which measures requests for tours and other services, was down 25% from last year.
In the four weeks ended Oct. 9, active listings fell 1% from the prior month, but rose 3% from last year, while new listings fell 2% from last month and were down 19% from 2021.
The median asking price rose 9% from 2021 to $379,725. Meanwhile, the median sale price increased 7% year over year to $367,621.
Thirty-five percent of homes that went under contract had an offer within the first two weeks, up a bit from the previous four weeks but down from 40% last year. Thirty percent of homes sold above list price, down from 45% last year and the lowest since August 2020.
The report also noted the monthly mortgage payment on a median asking-price home hit a record high of $2,559 at the current 6.92% mortgage rate. That was up 51% from last year’s $1,698 when mortgage rates were 3.05%.