New listings were near their six-month high in October, helping drive an increase in pending sales, though buyers backed out of deals at the highest rate on recordA new report from Redfin reveals the recent drop in mortgage rates could give sales another boost in November. Access the complete report findings here.
November 17, 2023 08:00 AM Eastern Standard Time–SEATTLE–(BUSINESS WIRE)–(NASDAQ: RDFN) —U.S. pending home sales rose 1% month over month in October to the highest level in a year on a seasonally adjusted basis. That’s according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage. They fell 4.8% from a year earlier, but that’s the smallest annual decline in almost two years.
Pending sales have been ticking up for several reasons:
- The supply crunch has eased slightly, giving buyers more options to choose from. The more homes there are on the market, the more can sell. New listings in October were comparable with September’s level, which was the highest in six months on a seasonally adjusted basis. They fell 4.5% from a year earlier, but that’s the smallest decline since summer 2022. Active listings, the total number of homes for sale, rose 1.4% month over month to the highest level since May and were down 12.5% from a year earlier—the smallest decline in four months.
- Sellers are cutting prices and offering concessions to entice buyers. Roughly 1 in 5 (20.8%) homes that sold in October had a price drop, just shy of the 21.6% record high hit a year earlier. More than one-third of sellers are offering concessions, which can include money for repairs, closing costs and/or mortgage-rate buydowns.
- People have to move, even when it’s expensive to do so. Many house hunters have been on the sidelines for months, waiting for mortgage rates and prices to drop. But not everyone can wait forever; major life events like divorce and new jobs are bringing some buyers back to the market. And other buyers are jumping in because they want to relocate to somewhere more affordable.
- Mortgage rates fell slightly at the end of October, which could have contributed to the uptick in pending sales as buyers went to lock in lower borrowing costs. Rates have fallen further this month, which means pending sales may post a bigger increase in November.
“I’ve had a lot of sellers reach out to me recently saying they’re ready to list their homes—a reversal from recent months,” said Heather Mahmood-Corley, a Redfin Premier real estate agent in Phoenix. “Everyone has a different reason for relocating. One of my sellers is moving because she wants to buy her father’s house and he’s giving her a deal, which helps offset the higher mortgage rate she’ll take on. Another is moving to Florida with her sister because her husband passed away; she built up a lot of equity, so is able to pay in cash. Other people are selling because they want to live somewhere more affordable.”
October 2023 Highlights: United States
But Buyers Backed Out of Deals at the Highest Rate on Record
While pending sales have inched up in recent months, closed home sales have continued declining. In October, closed sales fell 1.8% from a month earlier and 12.5% from a year earlier, hitting the lowest level since the onset of the pandemic on a seasonally adjusted basis. That’s partly because many deals are falling through at the last minute.
Roughly 54,000 U.S. home-purchase agreements were canceled in October, equal to 17.2% of homes that went under contract that month—the highest percentage in Redfin records that date back to 2017. That’s up from 16.1% one month earlier and 16.6% one year earlier.
“I’m seeing a lot of cold feet,” said Redfin Tampa Sales Manager Eric Auciello. “Home prices are high, mortgage rates are high and insurance costs are high, and when buyers see the final number, a lot of them are backing out.”
Some buyers are also walking away when sellers refuse to fix issues that come up during the inspection, according to Mahmood-Corley.
“Buyers want turnkey houses because everything is so expensive now, whereas in 2021 and 2022, they felt lucky to get any house,” she said. “And while I’m seeing more sellers in the market, they’re squirrely too. They’re backing out when they don’t get the price they want.”
The cancellation rate could tick down in November as buyers take advantage of the decline in mortgage rates. The average 30-year-fixed mortgage rate fell to 7.44% this week, the lowest level since September.
Home Prices Climbed 4% From a Year Earlier
The median U.S. home sale price rose 3.5% year over year to $413,874 in October and was up slightly (0.5%) from a month earlier.
Prices were just 4.4% below their May 2022 record high of $432,732, in part because buyers are still competing for a limited number of homes, which is buoying prices; while listings have inched up in recent months, they remain historically low.
Metro-Level Highlights: October 2023
- Pending sales: In North Port, FL, pending sales rose 16.4% year over year, more than any other metro Redfin analyzed. Next came Dallas (10.9%) and Tampa, FL (8.8%). The biggest declines were in Greensboro, NC (-30.6%), Birmingham, AL (-24.3%) and Knoxville, TN (-24.2%).
- Closed sales: Closed sales climbed from a year earlier in just five metros: Cape Coral, FL (27.3%), Salt Lake City (6.5%), North Port (5.8%), Milwaukee (1.8%) and McAllen, TX (1.5%). They fell most in Tacoma, WA (-27.4%), Oxnard, CA (-22.8%) and Frederick, MD (-20.4%).
- Prices: Median sale prices rose most from a year earlier in Lake County, IL (16.4%), Newark, NJ (15.2%) and Camden, NJ (13.8%). They fell most in North Port (-8.2%), Austin, TX (-6.5%) and Honolulu (-4.3%).
- Listings: New listings rose most from a year earlier in Cape Coral (77.3%), North Port (47.3%) and McAllen (15.6%). They fell most in Tacoma (-21.6%), Atlanta (-20.8%) and Portland, OR (-19.6%).
- Supply: Active listings increased fastest in Cape Coral (40.4%), North Port (35.3%) and New Orleans (24.5%). They decreased fastest in Las Vegas (-39.5%), Stockton, CA (-34.6%) and Tacoma (-31.2%).
- Competition: In Rochester, NY, 72.2% of homes sold above their final list price, the highest share among the metros Redfin analyzed. Next came Buffalo, NY (65.5%) and Newark (64.4%). The shares were lowest in North Port (8.1%), Cape Coral (10.1%) and West Palm Beach, FL (11.2%).
- Speed: In Rochester, 74.4% of homes that went under contract did so within two weeks—the highest share among the metros Redfin analyzed. Next came Buffalo (63.9%) and Grand Rapids, MI (61.4%). The lowest shares were in Honolulu (4.9%), Chicago (11.8%) and Lake County (12.3%).
To view the full report, including charts, please visit here.
Redfin (www.redfin.com) is a technology-powered real estate company. We help people find a place to live with brokerage, rentals, lending, title insurance, and renovations services. We also run the country’s #1 real estate brokerage site. Our home-buying customers see homes first with same day tours, and our lending and title services help them close quickly. Customers selling a home in certain markets can have our renovations crew fix up their home to sell for top dollar. Our rentals business empowers millions nationwide to find apartments and houses for rent. Customers who buy and sell with Redfin pay a 1% listing fee, subject to minimums, less than half of what brokerages commonly charge. Since launching in 2006, we’ve saved customers more than $1.5 billion in commissions. We serve more than 100 markets across the U.S. and Canada and employ over 4,000 people.
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