Home sellers are realizing it's no longer their housing market
Updated: Jul 9
Rising borrowing costs erode buyer confidence
Other signs point to more reluctant homebuyers.
“Demand is still strong, but not nearly as much as three or six months ago when the market was at a feverish pace,” President of WSFS Mortgage, Jeffrey Ruben, told Yahoo Money. “We would see multiple offers, sometimes 10, 12 or 15 people bidding on the same house. We’re not seeing those stories today.”
As borrowing costs swell across the country, buyer confidence has ebbed. Approximately, 57.8% of home offers written by Redfin agents faced competition on seasonally adjusted basis in May, the lowest level recorded since February 2021. That’s down from a revised 60.9% one month prior, according to Redfin. It's also a decline from 67.8% in April – and marks the fourth consecutive drop in bidding-war activity.
“The frenzied rush to find a home and lock-in historically-low interest rates seen during the past two-plus years has been relegated to the history books,” George Ratiu, manager of economic research at Realtor.com, said in a prepared statement. “The result is a softening housing demand, which comes as many homeowners are embracing the new normal and listing their homes for sale.”
Contracts to purchase previously owned homes rebounded in May after declining for six straight months, likely due to a brief pullback in rates last month. The National Association of Realtors Pending Home Sales index, rose 0.7% as home shoppers in the Northeast region took advantage of the pause in mortgage rates surge.
Still, homebuyers face harsh affordability conditions, with the median listing price of $447,000 — pending home sales were down 13.6% from a year ago.
The impact of rising mortgage rates and home prices has effectively cooled the housing market. Redfin data showed touring activity as of June 19, was down 6% from the start of the year compared to a 24% increase a year earlier. Mortgage applications were down 10% from a year prior, and fewer people searched for ‘homes for sale’ on Google during the week ending June 18, down 14% from a year ago.
“Typical first-time buyers are still in very short supply,” Len Kiefer, deputy chief economist for Freddie Mac, told Yahoo Money. “Now you’ve got these super high rates, so it's a big pinch for those first time buyers. Still there’s a very strong demand despite some challenges.”