Buyers are regaining some control as the market shifts and supply grows, according to a new report.
The report, released Thursday by the online brokerage Redfin, found that more than one in five sellers dropped their asking price during May 2022, the highest rate since October 2019, as mortgage rates sit at over 5 percent, and an increasing share of buyers find themselves priced out of the market.
Redfin’s Homebuyer Demand Index — which uses requests for home tours and other homebuying services from Redfin agents to gauge buyer demand — declined 9 percent during May, as pending sales posted their largest annual decline since Spring 2020, and the number of homes for sale posted their smallest decline since the same period.
The data points to a market that is starting to cool off and shift slightly in the favor of homebuyers according to Redfin, but supply challenges are likely to persist and keep prices elevated.
“The sudden surge in mortgage rates led to a sudden and significant cooldown in the housing market in May,” Redfin Economics Research Lead Chen Zhao said in a statement. “However, mortgage rates are now stabilizing and homes remain in short supply, so while we do expect home-price growth rates to decline, we don’t expect prices to fall much at the national level. For homebuyers trying to determine the best timing this year, the main benefit of waiting is that there may be less competition as supply starts to build up.”
Touring activity has seen a steep dropoff, falling 27 percentage points compared to May 2021, according to Redfin. Despite the traditional Spring homebuying season, there was more home touring activity in the first week of January than May this year.
Meanwhile, mortgage application activity was down 14 percent from a year earlier, according to Redfin, as rates shot up but stabilized, decreasing slightly to 5.02 percent during the week ending June 2. The increased rates come as the median price of a single-family home shot up 17 percent year-over-year to $412,450.
Though the median monthly mortgage payment declined slightly in March, now sitting at $2,391, it is still up 40 percent from May 2022, when it was just $1,710 and mortgage rates were at 2.99 percent.