Demand for homes usually starts to heat up at the onset of spring, but according to Redfin, the opposite is happening as mortgage rates climb past 5% and affordability worsens.
The real estate brokerage’s Homebuyer Demand Index, which tracks requests for home tours and other homebuying services from Redfin agents, remains up by 2% year over year, but it has receded by 3% in the past four weeks. Compare that to last year, when the index rose by 5% during the same four-week period.
Additionally, tour activity from the start of this year through April 10 was down 23 percentage points year over year, according to ShowingTime, a Zillow-backed technology provider used by real estate agents for home tours. And Google searches for “homes for sale” during the week ending April 9 were down 3% year over year.
“There really is a limit to homebuyer demand, even though the market over the past few years has made it seem endless,” said Daryl Fairweather, chief economist at Redfin. “The sharp increase in mortgage rates is pushing more homebuyers out of the market, but it also appears to be discouraging some homeowners from selling.”
Meanwhile, in another signal that demand isn’t quite measuring up to sellers’ hopes, Redfin reported that the share of home listings with price declines is growing at its fastest rate for any spring since at least 2015. But despite the early signs of market regression, relief for would-be homebuyers hasn’t yet arrived.
Homes are still flying off the market, with 45% of newly listed homes finding a buyer within a week, per Redfin data. And affordability remains a constant issue, with the average home sold still going for 2.4% above asking price. The median sales price during the four-week period ending April 10 was $389,178, a record high and a 17% annualized increase.
“If a home is on the market for more than a week, people start to wonder why or assume something is wrong with it,” said James Gulden, a Redfin agent in Boston. “Every offer I’ve written recently has faced multiple offers, but some people have finally had enough of all the competition and are pulling out. They’re becoming less willing to make a risky offer in a high-stress bidding-war situation.”
The shortage of available homes for sale is keeping market activity brisk, and with both prices and interest rates still on the rise, Fairweather cautioned that the landscape isn’t expected to quickly shift to buyers’ favor.
“With demand and supply both slipping, the market isn’t likely to flip from a seller’s market to a buyer’s market anytime soon,” she said.