Homebuyers are backing away from the market as mortgage rates continue to climb. But new listings aren’t declining as quickly, Redfin reports.

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It’s becoming increasingly clear that this is going to end up being the slowest year for real estate transactions since the early days of the Great Recession.

That’s the take of Redfin economists, at least.

The Seattle-based real estate company is now projecting there will be somewhere around 4.1 million sales of existing U.S. homes in 2023 when it’s all said and done, according to a new report released Thursday. 

“The last time home sales were this low was during the Great Recession,” Chen Zhao, Redfin economic research lead, said in the report. “At that time, tough economic conditions and slow demand pushed home prices down 30 percent year over year in some parts of the country, creating an opportunity for first-timers to snatch up starter homes — but this time, there’s no deal to be had.”

Redfin’s projection is informed, in part, by underlying demand conditions that have continued to deteriorate deep into the fall. 

Chart by Redfin

Mortgage rates — already far higher than the rate on the typical homeowner’s outstanding mortgage loan — have only continued to climb since the spring. Average rates now exceed 7.5 percent for a 30-year loan.

Redfin’s brokerage and listing portal operations are seeing this environment continue to take a toll on requests for tours and listing traffic, amid other early indicators of weakening buyer demand. 

The company’s own internal measure of homebuyer demand is down 6 percent compared to this time last year, when the market had already cooled substantially and prices were in the midst of a moderate decline nationwide.

“Mortgage rates are staying high longer than anticipated, keeping away everyone except those who need to move and pushing our sales projection for the year down to a 15-year low,” Zhao said in the report.

But even as buyers remain mired in an unaffordable environment, the balance of power at the negotiating table may have begun a meaningful shift in their favor.

Pending sales have declined steadily since the start of September, while the number of new listings has been relatively steady in that same time. 

That means there are more listings available to each active buyer than there were a couple of months ago, when there were around 2.8 months of inventory, according to Redfin’s data. Now at 3.4 months of inventory nationwide, it’s still a clear seller’s market. But it’s the least seller-advantaged figure recorded at this time of year since before the beginning of the pandemic.

Chart by Redfin

The decline in sales is felt most steeply in the existing-home market. New construction sales are actually up 1.5 percent year over year — but that’s only after prices of new homes declined 4 percent over the past 12 months, Redfin’s data shows.

Email Daniel Houston

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