A typical homebuyer’s mortgage payment is up 15% since mid-August, climbing $337 to a new high of $2,547, according to a new Redfin report.
As mortgage rates approach 7%, Redfin found potential homebuyers are delaying or canceling plans to make a purchase. That was increasingly evident in August as pending home sales fell to their lowest level since the start of the year, and the number of homes selling above list price dropped to its lowest level in more than two years.
The market is reacting as homes are staying on the market longer and the number of sellers dropping their list price has reached its highest level since Redfin started tracking this data in 2015.
Redfin’s senior vice president of real estate operations Jason Aleem says sellers must react quickly and aggressively as the market turns.
“This means adjusting your pricing immediately if you want to be competitive and attract offers from a smaller pool of qualified homebuyers,” he said. “If your home isn’t the ‘belle of the ball’ in your neighborhood, you’re going to need to cut the price to sell it.”
Taylor Marr, Redfin’s deputy chief economist, says “sellers should anticipate that buyers are unwilling or unable to pay a price similar to what their neighbor’s home sold for a month ago, and buyers should connect with their lenders to find ways to mitigate the impact of rising rates.”
“This could include paying upfront to lock in a rate, switching to an ARM and tightening your budget so you don’t end up with a monthly mortgage payment that’s a stretch to afford in the months to come,” she added.
Redfin found fewer Google searches for “homes for sale” during the week ended Sept. 24, down 33% from last year. Its Homebuyer Demand Index, which measures requests for tours and other services, was down 13% from last year.
Mortgage applications were down 0.4% week over week and down 29% from last year as the 30-year mortgage rate rose to 6.7%, the highest level since July.
In the four weeks ended Sept. 25, active listings fell 0.8% from the prior month, but rose 6% from last year, while new listings were down 14% from 2021. The median asking price rose 10% from 2021 to $384,750. Meanwhile, the median sale price increased 7% year over year to $369,250.
Pending home sales fell 21% year over year, the largest decline since May of 2020.
Thirty-five percent of homes that went under contract had an offer within the first two weeks, with little change from the previous four weeks but down from 40% last year. Twenty-four percent of homes that went under contract had an offer within one week, also with little change from the previous four weeks but down 28% from last year.
The report also noted the monthly mortgage payment on a median asking-price home hit a new record high of $2,547 at the current 6.7% mortgage rate. That was up 50% from last year’s $1,698 when mortgage rates were 3.01% and up from Aug. 14’s recent low of $2,210.