Redfin: Home Price Reductions at Highest Level since 2010
Redfin, Seattle, reported nearly one in three homes for sale in October had a price reduction, the highest level in eight years.
Redfin reported by its measure, U.S. home sale prices increased by 4.5 percent year over year to a median of $297,200 in October, a return to an “overall healthy” level of price growth after posting a 6.5-year low level of growth in September.
Redfin Chief Economist Daryl Fairweather said home prices typically decline from September to October, having fallen by an average of 1 percent between the two months over the previous eight years. This October however, prices increased nationally 2.4 percent month over month. Despite this national increase, just 32 of the 71 largest metro areas Redfin tracks saw home prices increase from September to October, “which suggests that the monthly gain is due to the share of homes selling last month shifting slightly to more expensive areas rather than individual homes increasing in value.”
The report also pointed to evidence that the market is cooling down through price drops. In October, 31.3 percent of homes for sale had at least one price drop of more than 1 percent, the highest share of price drops on record since Redfin began tracking this metric in 2010, and 6.3 percentage points above last October’s level of 25 percent. In Seattle, nearly half of homes for sale had price drops, with an average price cut of $27,500, down from more than $30,000 a year earlier.
Redfin reported homes for sale rose by 1.3 percent from a year earlier, the highest level of inventory growth since September 2015. National inventory growth continues to be driven by big increases in softening coastal markets such as San Jose (110.9%), Seattle (73.2%), San Diego (38.2%) and Boston (17.3%).
However, while the number of homes newly listed in October rose by 5.4 percent year over year, the number of completed home sales continued to sink, dropping by 5.7 percent from 2017. Home sales declined in 59 of the 71 largest metro areas that Redfin tracks. Seattle, San Diego and San Jose, where high home prices mean that rising mortgage rates have the largest effect on affordability, are seeing the biggest increases in inventory coupled with decreasing sales. The biggest sales declines were in some of the most expensive metros, including Seattle (-19.6%), San Diego (-15.7%), and Honolulu (-22.9%).
“An increase in interest rates effectively makes home-buying more expensive because buyers have to pay higher monthly mortgage payments even if the sticker price hasn’t changed,” Fairweather said. “Some homebuyers are adjusting their price range down, and others are backing out of home-buying entirely–deciding that renting is a better deal. Sellers are now realizing buyer demand isn’t what it used to be and are dropping their prices. When buyers and sellers are on the same page, the market moves quickly, but since sellers were slow to react, we’ve seen a slowdown in the housing market.”
Across Redfin-measured metros, the typical home sold in October went under contract in a median of 43 days, two days faster than last year. This October, 20.3 percent of homes sold above the list price, down from 22.9 percent last October. The share of homes that went under contract within two weeks also fell, from 23.6 percent last October to 21.3 percent this October.
“While [wild] fires are disrupting many Californians’ lives and therefore any immediate home-buying plans, we’re already hearing from Redfin agents in Southern California that they expect homeowners and homebuyers to be resilient as they have in the face of past natural disasters, with renewed commitment to rebuilding and picking up where they left off with a home search,” Fairweather said. “Rising mortgage rates and high home prices have a bigger long-term effect on the local housing market than the fires’ destruction.”
