For-sale inventory of single-family homes increased by its largest year-over-year margin since 2015, but it was the result of homes staying on the market longer rather than a flood of new listings, Redfin found.
The total number of homes for sale jumped 15% on an annual basis for the four-week period ending Dec. 4, according to data compiled by the real estate brokerage. At the same time, the number of new homes listed slid by 20% over that period. The combined factors indicate that properties are taking longer to sell.
The average length of time homes sat on the market before being sold lengthened to 37 days, up from 28 a year ago, the largest slowdown on record. The current average is now more than two times longer than it was in June, when it had shortened to a record low of 17 days. Listings sold within two weeks also fell to 30% — the lowest since January 2020.
The slowdown appears to signal that consumers are holding out to see if interest rates and still-elevated home prices fall further before making their purchase. An average of 6% of homes on sale each week saw a price drop, slowing from 7.5% a month earlier, but still up from 2.8% a year ago. Last week, Redfin also reported the share of homes delisted rose to a record 2% during a 12-week period between September and mid November.
But its most recent weekly Homebuyer Demand Index, which tracks demand for home tours and other buying services, also showed a turnaround, up 5% from the last full week of November. The index is currently 29% below its mark in the same week of 2021.
Interest rates hold the clues to the direction and speed of where the purchase market heads over the next 12 months, Redfin Deputy Chief Economist Taylor Marr said.
“Since we expect only a small decline in prices next year, mortgage rates will dictate housing affordability, and as a result, demand and sales, in 2023. If rates continue declining, more buyers may wade back into the market, as they’ll have lower monthly payments,” he said in a press release.
Since topping out at 7.08% in late October, the Freddie Mac 30-year benchmark rate has steadily dropped over the past several weeks, with its most recent weekly reading coming in at 6.33%. Improving inflation numbers are leading Federal Reserve officials and some experts in the mortgage industry to hint that moderation is on the way. A panel of Redfin experts forecasted rates to drop to 5.8% by the end of 2023.
“Next Tuesday’s inflation report is the 500-pound gorilla in the room, and the Fed’s press conference the next day will bring us much more clarity on how soon and how quickly we can expect mortgage rates to come down in the new year,” Marr said.
The median price of homes sold in the four weeks preceding Dec. 4 increased 1.9% year over year to $355,500, one of the most sluggish periods of growth since June 2020. The median asking price of newly listed properties came in at $357,470, up 4% from the same period a year ago.
California took the biggest hit when it came to decreasing home values with six cities on Redfin’s list of 50 most heavily populated markets posting price drops over the past 12 months. In total, 11 metropolitan areas saw prices drop from a year ago, led by San Francisco, San Jose and Los Angeles, at 7.8%, 3.6% and 2.2%, respectively. Detroit and Sacramento rounded out the bottom five at 1.4% and 1.2%.