The added punch of mortgage rates nearing 8 percent is making this year’s fall season particularly slow.

Spring and summer were barely warm to the touch, and now the fall housing market is showing signs of further cooling.

The added punch of mortgage rates nearing 8 percent is making this year’s fall season particularly slow, with home values showing an uncharacteristic 0.1 percent decline in value between August and September as a result, according to a report released Thursday by Zillow.

“Mortgage rates approaching 8 percent are taking the wind out of the market’s sails, pushing monthly mortgage payments beyond many buyers’ budgets,” said Jeff Tucker, Zillow senior economist. “While attractive listings are still moving at a brisk clip, competition among buyers is fading quickly due to the shock of mortgage rates on top of normal autumn seasonality.”

The 0.1 percent decline between August and September was not as steep as the 0.8 percent decline noted in 2022 at the same point, but was still unusual for this time of year. Between 2015 and 2019 monthly growth hovered between 0.1 and 0.4 percent in September, according to Zillow.

The typical home value now stands at $350,091 nationally, up 2 percent from September of 2022. Of the 50 largest cities in the United States, 31 have home values higher than a year ago.

The strongest price appreciation was seen in some of the most affordable markets, with Hartford, Connecticut, growing 11.1 percent annually, Milwaukee growing 8.5 percent, Providence, Rhode Island, seeing appreciation of 6.4 percent and Virginia Beach, Virginia, homes gaining 6.2 percent in value. 

According to a separate report released by Redfin on Thursday,  new listings ticked up 2 percent in September, despite many homeowners being locked into lower mortgage rates. Listings in September also spent two more days on the market than they did in August, according to Zillow, possibly signaling that homebuyers are pulling back even further as mortgages become more expensive. The total number of homes for sale remains 14 percent lower than it was last year, Redfin noted.

Mortgage-purchase applications inched up slightly this week, but they’re still near their lowest level in nearly 30 years, and Redfin’s Homebuyer Demand Index — which measures tour requests and other early-stage demand signals — dropped to its lowest level in nearly a year, according to the report.

Redfin economists recommended buyers who are still in the game try to shop around for a mortgage rate that suits them and take solace in the Federal Reserve’s announcement that it is unlikely to raise rates again in the short term.

“Despite last week’s hotter-than-expected jobs report, rates have fallen after the Fed signaled this week that it is unlikely to hike interest rates again and war broke out in Israel,” said Redfin Economic Research Lead Chen Zhao. “Buyers should also remember that the average mortgage rate in the news is just that: an average. Many buyers can secure a lower rate by shopping around; the difference between rates among lenders is bigger when rates are higher.”

Email Ben Verde

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