The one-two punch of rapid home price increases and a sharp rise in mortgage rates is beginning to push some prospective home buyers out of the market, according to new research by Redfin real estate brokerage.
A decrease in mortgage applications, fewer online searches, and fewer home tours are all signs that some buyers are waiting on the sidelines this spring. Mortgage applications for a purchase rather than a refinance fell 10 percent during the week ending March 25 compared with that same week in 2021, according to the Mortgage Bankers Association, which Redfin says is the second week in a row of a double-digit decline in purchase applications.
According to Redfin’s analysis, the monthly principal and interest payment on a home at the median asking price rose to $2,234 at the current average mortgage rate of 4.67 percent. The monthly payment was up 31 percent from a year earlier when rates were 3.18 percent. The average monthly payment for a new mortgage is up to $537 since the beginning of 2022, according to Redfin.
The median listing price rose to $405,000 in March, according to Realtor.com, an increase of 13.5 percent compared with March 2021 and up 26.5 percent compared with March 2020. However, the combination of moderating demand and construction of newly built homes at a 16-year high is predicted to relieve the strain on inventory by June or July, according to Realtor.com’s analysis, which could mean the pace of price growth will slow.
The slight softening of the housing market means some sellers are reducing their asking price. While this isn’t a huge difference, the number of sellers who lowered their price before selling increased from 5.8 percent in March 2021 to 6.0 percent in March 2022, according to Realtor.com. However, that is still nine percentage points below the typical amount of price reductions in 2017 through 2019.
While indications of a moderating housing market are in place, most areas continue to experience rapid sales and high prices. Competition is particularly heated between buyers, investors, and people continuing to move from high-priced housing markets to relatively more affordable markets. Redfin’s researchers found that indications of a slowing market — fewer mortgage applications, tours, and searches — were highest in California markets. Other locations where Redfin reports fewer requests for real estate agent services to include Seattle, Boston, and D.C.
The median listing price in the D.C. region was $545,000 in March, according to Realtor.com, a 10.1 percent increase over March 2021. The number of active listings in March 2022 was down 16.8 percent compared with March 2021. The percentage of sellers who reduced their prices was 5.6 percent in March 2022, approximately the same as in March 2021.
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