According to the CEO of real estate company RedFin, the US housing market is experiencing a substantial downturn, with cooling conditions leading to an increase in home sale cancellation rates.
When mortgage rates rose in May and June as a result of the Federal Reserve’s abrupt interest rate hikes, buyers were “totally scared out,” according to RedFin CEO Glenn Kelman.
Even while 30-year mortgage rates have decreased marginally since June, when they rose above 5.8%, Kelman says the economic unrest has caused “a very high cancellation rate” for home sales, “even for the agreements that are under contract.”
According to Kelman in an interview with MarketWatch that was published last Friday, “It’s just difficult to put deals together because the economy is so fragile.” “This period is remarkably ambiguous.”
Home prices have started to decline, particularly in hot markets like Boise, Idaho, and Tampa, Florida, where sellers have lowered their asking prices in response to falling demand. Instead of accepting a lesser offer price, some sellers choose to postpone their plans.
In the four weekends ending on August 21, new sale listings fell 15%, according to a RedFin analysis released last week. Since the start of the COVID-19 epidemic, that number was the biggest annual fall in listings.
Sellers are accepting the fact that fluctuating mortgage rates have slowed demand, according to Chen Zhao, the head economist at Redfin. Because they are concerned they won’t receive a fair offer or are afraid to give up their low mortgage rate, some homeowners are sticking put while others are lowering their asking prices.
The median house sale price for the same time frame was $371,125, which is 6% less than the record-breaking $394,775 mark set in June. In contrast, prices are still up 6% from the same week last year.
From an all-time high reached in May, the median listing price has decreased by 5% to $382,475.
According to Freddie Mac, the 30-year fixed mortgage rate reached 5.55% last week. Since January, rates have nearly doubled.
According to data, 21% of property sellers reduced their asking prices in July, with the biggest drops occurring in “boomtowns” from the epidemic era that experienced a substantial surge in activity over the previous two years.
As the Fed tightens monetary policy to contain inflation, the housing downturn is anticipated to persist in the coming months. After Fed Chair Jerome Powell made harsh comments at an annual gathering in Jackson Hole, Wyoming, the US stock market started to decline on Monday.