Fewer Americans are looking into buying a home this winter compared with this time last year, and those who are interested are not in a rush to close a deal, the latest figures reveal.
Pending home sales in the U.S—where buyers have signed a contract but the sale has not yet been closed—plunged by nearly 6 percent year-over-year in the four weeks ending February 15, according to a new Redfin report.
It is the biggest decline in a year and a clear sign of the slowdown the U.S. housing market has been facing this winter, with freezing temperatures exacerbating the squeeze on demand already held by higher costs.
During the same period, the typical U.S. home took 67 days to go under contract, a week longer than last year and the longest span since early 2019.
What Does The Latest Data Tell Us?
Even with mortgage rates coming down slightly over the past few months and home price growth slowing down compared to the pandemic, buying a home remains much more expensive than it used to be in 2019—and for many Americans, simply unaffordable.
The stark decline in pending home sales recorded by Redfin shows that would-be homebuyers are sticking to the sidelines of the market, whether that is because the price for their dream home is not right, borrowing costs are too high, or they are concerned about what is going to happen to the U.S. economy in a few months’ time.
While home prices are no longer reporting double-digit increases, as they were between 2020 and 2022, they are still inching up. The median home-sale price rose 1.1 percent year-over-year in the four weeks to February 15, the biggest uptick in two months.
Within the same time frame, the weekly average mortgage rate was 6.09 percent–near the lowest level in three years, but still double pandemic-era lows. While the median monthly mortgage payment is now $2,601, down 2.9 percent from a year ago, it is hardly more affordable for households, as it is still only about $200 shy of the all-time high.
This is not a new phenomenon. For the past year, demand has been shrinking across the country as higher costs make would-be buyers hesitant. This has led to a general increase in inventory across the country, creating a massive imbalance between the number of sellers and buyers in the market which promised to give the latter more negotiating power.
But the latest data shows that sellers are taking notice of how tepid the U.S. housing market has gotten, and many are deciding to delist their properties rather than offload them for less than their asking price.
New listings dropped 3.1 percent year-over-year in the four weeks ending February 15, according to Redfin, and the total number of homes for sale fell 1.5 percent—the second straight decline after roughly two years of increases.
What Does This Mean For Buyers?
“There are a few things keeping buyers at home, like snowy weather and 6 percent-plus mortgage rates,” Aaron Glicken, a Redfin Premier agent in Nashville, Tennessee, said in the report.
“But for the house hunters who are venturing out, it’s the strongest buyer’s market I can remember,” he continued.
“Buyers are able to be picky, ask for concessions, and come in below asking price. Some sellers won’t budge because they bought at the height of the market a few years ago and prices have corrected a bit. But some need to offload their homes—and in those cases, buyers have leverage,” he added.
Glicken believes buyers “who are serious about moving” should take advantage of the current slow market, as he expects sales to pick up in the spring again. “Especially if rates come down,” he said.
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