Listings and prices decline, but there's no freefall
The latest housing market indicators continue to trend slightly against sellers, but buyers are even more hesitant to enter the market.
Key points:
- While buying and selling has slowed down dramatically, prices are only dropping gradually.
- Inventory is up year-over-year but appears to be ticking downward, consistent with seasonal patterns.
- Affordability is still in bad shape: The monthly mortgage payment on a typical home was up 50.7% from a year earlier.
Recent housing market reports found that many potential buyers and sellers remain on the sidelines, but national home prices are still decreasing only gradually.
The latest numbers on new and active listings from Realtor.com suggest a "wait and see" approach from both buyers and sellers. New listings for the week of Nov. 5 were 20% lower than a year ago while inventory was up 42% for the same period.
It's the 18th week of year-over-year declines for new listings, a sign that sellers remain reluctant to give up the low interest rates on their current homes. The fact that inventory has gone up this late in the season — and despite the drop in listings — points to a growing pool of potential buyers who are hesitant to act.
Active listings are expected to decline heading into Thanksgiving and the winter holiday season as sellers pull listings, particularly ones that have been on the market for a while. That appeared to be happening in the second week of November, according to Altos Research. In his weekly video market update, Altos CEO Mike Simonsen said the number of active listings was just over 571,000, down slightly from the previous week.
"Declining inventory also is a signal that there aren't any waves of new inventory, maybe from panicky sellers or investors," Simonsen said.
While using different measures, reports from Realtor.com and Redfin show a similar trend when it comes to median home prices: While still up year-over-year, home prices are gradually trending downward toward flat year-over-year growth.
Affordability is the main factor for the slowdown — higher interest rates and already high home prices have made mortgages much more costly, keeping buyers out of the market and forcing sellers to rethink their pricing strategy.
Redfin's report showed just how out-of-balance affordability is for potential buyers: The monthly mortgage payment on the median-asking-price home was $2,542 at the recent 7.08% mortgage rate, up a staggering 50.7% from $1,687 a year earlier, when mortgage rates were 2.98%.
It's possible that buyers may get some relief, as interest rates have taken a bit of a dip in recent days after inflation numbers came in below expectations. Given the volatility of interest rates this year, it is unclear whether this a trend or a short pause before rising again.
As sellers try to navigate listing prices, they need to accept that today's market is not the booming market of a year ago. Redfin's report found that 28% of homes sold above list price in a four-week period ending Nov. 6, down from 43% for the same period in 2021. On average, 7.9% of homes for sale had a price drop each week, up from 3.6% compared to a year ago.
The price reductions have also impacted the sale-to-price ratio, which measures how close a home's sold price was to its final asking price. For the period ending Nov. 6, the ratio was 98.7%, down from 100.4% a year earlier. Although the typical home is still selling close to its list price, this was the lowest level since July 2020.