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Homebuyers pull back as US prices record their first yearly decline in years

Digilifetrends Published 3 min read

Redfin figures show pending sales at a record low while the typical monthly mortgage payment remains close to an all-time peak.

Buyers retreat as home prices post first annual drop in years

For the first time in more than three years, the median U.S. home-sale price slipped below its year-earlier level, and it did so in back-to-back weeks.

In the four weeks ended Oct. 25, Redfin reported a median sale price of $389,601, down 0.1% from a year earlier. The previous week posted a 0.2% drop, ending a stretch of annual price gains that had continued through 2023.

Lower prices have not improved affordability. The median monthly mortgage payment rose to $2,786 at a 7.32% mortgage rate, up 10.7% from a year ago and the second-highest figure in Redfin's records.

Freddie Mac's Primary Mortgage Market Survey showed the weekly average rate easing from 7.4% the week before, but it remains near a three-year high.

Demand sinks to a new bottom

Buyer demand is weakening broadly and continuing to worsen. Pending home sales fell 1.8% from the prior week to a seasonally adjusted 276,352, the lowest level in records going back to 2021 and 15.9% below a year earlier.

Contract activity declined across all 50 of the largest U.S. metro areas for a third straight week. Seattle led the group with a 31.6% annual decline in pending sales, followed by Atlanta at 25.9% and San Diego at 25.3%.

Regional gaps remain sharp. As Mortgage Professional America has noted in its ongoing coverage of changing housing conditions, Sun Belt markets are seeing the steepest price cuts, including Austin, Texas, down 4.6% year over year, and Kansas City, Missouri, down 4.3%.

At the other end of the spectrum, San Francisco posted a 15% annual increase, the strongest gain among major metros.

New listings eased 0.6% to 352,421, their lowest level since January, as sellers respond to softer demand.

Even so, active inventory inched up 0.3% to 1,510,619 homes, and months of supply climbed to 4.5, a level generally viewed as balanced. That gives buyers more bargaining room than they have had in more than a decade. Sellers are stepping back, but buyers are retreating faster.

What this means for brokers

Melissa Cohn, regional vice president at William Raveis Mortgage in New York, told MPA that the pace of market improvement depends heavily on borrowing costs.

“I think if rates remain stable, then hopefully we’ll see some improvement because a lot of people put off making a move last year,” Cohn said.

“But hopefully inflation will stabilize and head back down towards the 2% level, the Fed will enact two additional rate cuts this year, we’ll see lower rates and we’ll have a better year.”

That outlook has not materialized. Rates have risen to 7.32%, and demand is now weakening across every major market.

Bruce Gehrke, senior director of wealth and lending intelligence at JD Power, told MPA that the current market makes local expertise especially important for brokers.

“I think brokers need to continue to focus on where their competitive advantage has always been,” Gehrke said.

“That’s more local, that’s more personal, face-to-face with the borrower. I think that’s still an advantage that they have.”

The share of listings with price cuts increased to 21.5% from 20.9% the previous week, while just 23.2% of homes sold above list price. The average sale-to-list ratio held steady at 98.3%.

The supply pipeline offers little immediate relief. As MPA has reported, single-family housing starts have pulled back sharply, and new construction has not kept pace with demand even as buyer interest fades.

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