Surging mortgage prices are causing buyers to step back amid signs a recent Redfin report found point to the start of a shift in the market. 

Since the beginning of the year, the typical monthly mortgage payment rose by more than $500, according to the report. And with rates quickly approaching 5%, Redfin expects the impact of mortgage rates on homebuyer demand to change from the buyers looking to purchase before rates rise again to buyers stepping back as costs exceed their budgets. 

Several signs are pointing to the start of this shift, the report found, including fewer people searching online for homes and applying for mortgages than this time last year. Year-to-date growth in home tours is far below 2021 levels. More sellers are reducing their prices. And the share of homes selling quickly continues to grow yet at a much slower pace than we’ve seen in previous months. 

All this doesn’t mean the market isn’t still hot. Homes today are still selling faster and for more money, as supply remains near record lows and fewer homeowners are putting their homes on the market. 

Redfin chief economist Daryl Fairweather said today’s buyers may not feel like the market is getting any easier because they are oftentimes competing against investors, all-cash buyers and those leaving expensive cities who aren’t as sensitive to mortgage rates. 

“But there are early indicators that the market is turning, and we expect the softening to become more apparent in the coming weeks, eventually causing home-price growth to slow,” he said. “We’ll be watching closely to see whether the market slows from 100 mph to 90 or 100 mph to 75.”

Last March, Redfin said it began receiving fewer requests for agents in pricey coastal markets like Seattle, San Diego, Boston and Washington, D.C. – areas the company found to be experiencing year-over-year declines in pending sales, even though homes are selling quicker. California is seeing larger declines in searches, touring and mortgage applications than anywhere else. 

Mortgage applications and rates are more indicators a change is underway.

For the week ended March 25, mortgage applications fell 10% from the same time last year, the second week in a row of double-digit annual decreases. It was up 1% from the prior week.

Thirty-year mortgage rates rose to 4.67% for the week ended March 31, compared to 4.42% the previous week. It was the highest level they’ve been since December 2018. 

In the four weeks ended March 27, active listings fell 22% year over year to 475,800, the fifth-lowest level on record. The median asking price rose 15% from 2021 to $399,450, a new record high. Meanwhile, the median sale price increased 17% year over year to a record-high of $382,713. It was also the biggest jump in the median sale price since the four weeks ended Aug. 1, 2021. 

Fifty-nine percent of homes went under contract with an accepted offer within the first two weeks of being listed, up 4% from last year, marking another record. 

Additionally, 51% of homes sold above list price, up from 40% last year, the highest since the four weeks ended Aug. 15, 2021.