Potential homebuyers were not actively house hunting during the holiday season and properties are sitting on the market for longer periods of time, a Redfin analysis finds.
On average, houses sat for 40 days before going under contract in the four weeks ending December 25. It’s a stark difference from May when houses were on the market for an average of 18 days.
Slower sales drove the total number of properties available for purchase up by 18% year-over-year, while new inventory tumbled by 21.6% from last year.
As of December 25, home touring activity tracked by Redfin was down 69% from the start of the year, and online searches for “homes for sale” flatlined.
Aside from a slow holiday season, economic uncertainty and elevated mortgage rates — which ticked up to 6.42% this week — are contributing to the slowdown, the brokerage’s report noted.
“This week’s mortgage-rate pop can be chocked up to a handful of factors, but the week between Christmas and New Years is typically the slowest of the year for pending sales,” said Taylor Marr, deputy chief economist at Redfin. “We’ll know more about the direction of rates and whether the recent uptick in early-stage demand will translate into sales when we’re settled into the new year.”
Mortgage purchase applications during the week ending December 21 were essentially flat from a week earlier and were up 4.6% from the month prior. Application volumes were down 64% year-over-year.
House prices have also started to edge downwards, falling in 17 of the 50 most populous metros, the report said. Prices fell by 9% year-over-year in San Francisco, by 6% in Los Angeles and 4.5% in Detroit.
Some buyers are “dipping their toes back in the market” and taking their time searching for homes, Redfin’s report said.
The brokerage’s homebuyer demand index rose by 14% from an October low. Redfin forecasts that sales won’t increase until “well into January.”