The economy and persistent inflation are tanking the housing market yet again, especially as mortgage rates reach a 20-year high, according to a new report from Redfin.
For the week ended Oct. 13, 30-year mortgage rates rose to 6.9%, their highest level since April 2002. Similarly, mortgage purchase applications were down 2% week over week, seasonally adjusted, and were down 39% from a year earlier during the week ended Oct. 7.
Pending home sales and new listings both posted even bigger annual declines than during the summer, when buyers and sellers initially reacted to rapidly rising rates. Data on sale prices, which typically lag a couple months behind other demand indicators, is also weaker than it was over the summer, when the pandemic homebuying boom ended.
Home listings with a price drop increased to the highest level on record, with 7.9% of homes for sale each week reducing prices, up from 4% a year earlier. The portion of homes that sold above their final list price dropped to its lowest rate since the early days of the pandemic, Redfin said.
“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."
"The combination," Marr added, "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.”
Redfin reported a disinterest in homebuying, as few people searched for homes for sale on Google and touring activity was down 23% from the beginning of 2022.
