High Mortgage Rates, Payments Make For Slow Spring Market

Borrowers are paying more for their mortgages than ever before, and this spring's homebuying market is anything but normal.

The median monthly housing payment hit an all-time high of $2,894 during the four weeks ending May 5, a new report from Redfin revealed. That’s 14% higher year-over-year.

“The market is a mixed bag, with high mortgage rates causing some listings to sit longer than I would expect in the springtime and high prices holding steady,” said David Palmer, a Redfin Premier agent in Seattle. “Sellers can rest assured that there are plenty of motivated buyers who are jumping into the market now; they finally understand that rates aren’t going to plummet anytime soon. Those buyers are the people who are moving because they need to. They’re relocating for a new job, going through a divorce, or growing their family. So even though some of my listings are taking longer to sell than they would in a typical spring market, they are selling eventually.”

Between April and May, home prices rose 4.5% to their own record high, as new listings rose 9% YOY, the smallest increase in three months (with the exception of the four weeks ending March 31, when there was an artificially small decline due to Easter). 

Many would-be sellers backed off when rates rose throughout April, and pending home sales dropped by 3% YOY, the biggest decline in two months.

It’s also not your typical spring home-buying market, which usually features fierce competition among buyers and sellers. Just 30% of homes sold above asking price, down 32% YOY and flat from the week prior. 

Adjusting to these conditions, 6.2% of home sellers dropped their asking price, the highest share since November and up from 4.3% a year ago. 

Perhaps the only signal that things might improve comes in the form of mortgage-purchase applications, which increased 2% from the week prior.