Buyers are stepping up, sellers are pulling back
Pending sales increased from September to October, but at the same time, delistings jumped as sellers feared taking a loss or settling for a lower price.
Key points:
- Pending sales got a small boost in October, but the increase may be short-lived.
- While Realtors expect further slowing in the market, economists say the "fundamentals are strong" and there are signs of stabilization.
- Sellers appear less optimistic, with delistings an at 8-year high. Those who bought during the pandemic were most likely to pull their homes from the market.
The fall real estate market appears to be experiencing dueling trends: More buyers have come off the sidelines — while more sellers are calling it quits.
Pending home sales, as measured by signed purchase contracts, rose 1.9% in October, though they were down 0.4% compared to a year ago, according to the National Association of Realtors.
The monthly increase could be more of a blip than a trend, however: NAR's October Confidence Index — a monthly snapshot of how Realtors view the market — shows that just 17% of respondents expect more buyer traffic in the next three months, down from September (20%) and a year ago (19%).
Affordability improving, but will plague the market 'for years'
Expectations of a slowing market are likely the result of slightly rising mortgage rates, economic uncertainty and weak consumer spending heading into the holidays, according to Lisa Sturtevant, chief economist at Bright MLS.
"The fundamentals of the U.S. housing market are still strong. But affordability challenges are going to characterize the housing market for years," Sturtevant said. "Lower mortgage rates will help bring out more buyers next year, but it is going to take time before there is better affordability in the market."
Still, October's pending home sales data suggests that the market is "stabilizing rather than stalling out" as affordability gradually improves, according to Odeta Kushi, deputy chief economist at First American.
Sellers are backing off
While inventory remains higher than a year ago, delistings are also on the rise — and increasing faster than overall listings. Redfin reports that nearly 85,000 sellers took their homes off the market in September, up 28% compared to a year ago and the highest level for a September in eight years.
"That increase is bigger than it looks on paper; it represents a fairly significant jump in delistings from last year," said Asad Khan, a senior economist at Redfin.
A variety of factors are involved, according to Redfin, including an increased risk of selling at a loss and a surge in "stale" listings: 70% of U.S. homes have been on the market for at least 60 days, while the typical delisted home was on the market for 100 days before the seller gave up on finding a buyer.
"More sellers are giving up because their homes have been sitting on the market for a long time, and they don't want to or can't afford to settle on accepting a low price."
More recent buyers most likely to delist
Sellers who purchased a home two to five years ago were most likely to pull their homes off the market, accounting for 34% of September's delistings.
"Many homeowners who bought during the pandemic demand frenzy still expect sky-high prices. They remember a seller's market, so they're hesitant to yield to buyers who want to negotiate the price down and/or ask for concessions," Khan said.
"Longtime owners, though, are more motivated to sell — they're often downsizing or relocating for retirement," Khan added.