The Fed’s plan to slow down the market with higher mortgage rates is working.
Higher mortgage rates have aided in a swift decrease in U.S. home sales. Although the current market still favors sellers, many concerned sellers are rushing to list their homes before a considerable cooling down of the market occurs.
Rising Mortgage Rates are Causing the Housing Market to Shift
According to Redfin data, April 2022 saw home prices up 15.4% year-over-year, selling for a median price of $424,146.
The number of homes sold was down 12.0% compared to last year.
Freddie Mac reported the average 30-year fixed-rate mortgage was 5.1% in the week ending May 26, 2022. At this time last year, the 30-year fixed-rate mortgage averaged 2.95%.
Redfin Chief Economist Daryl Fairweather says, “Rising mortgage rates have caused the housing market to shift, and now home sellers are in a hurry to find a buyer before demand weakens further.”
Housing Supply Increases
Realtor.com reported the supply of homes increased by 9% in the third week of May 2022 compared to 2021.
Redfin reported that new listings increased almost twice as fast in the four weeks ending May 15, 2022, compared to last year.
Pending Home Sales are Down
According to the National Association of Realtors (NAR), pending home sales dropped 3.9% in April from March.
The NAR’s data is accumulated using signed contracts on existing homes, not closings.
With sellers running the show just a few months ago, they are now seeing less interest and offers.
Redfin’s Homebuyer Demand Index, which measures requests for home showings and other services, was down 8% year-over-year for the week ending May 15, 2022; the most significant dip since April 2020.
- New home sales fell 16.6% in April from March.
- Existing home sales have fallen for three straight months.
- Since March, mortgage rates have steadily climbed, resulting in the highest rate in years.
- New U.S. housing supply increases.
The Party Comes to an End
Chief economist at Pantheon Macroeconomic, Ian Shepherdson recently stated, “The party is over.”
The market is shifting from a red-hot seller’s market to a more normalized market. Gone are the days of expecting double-digit offers on your home and selling for well over the list price.
What we are not seeing, however, are home prices falling. The U.S. median new home price is still up — 45% from 2020.
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