Home buyers are facing mortgage rates near 6%.
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Home prices rose 1.5% month over month in May, their smallest increase of any May in Redfin’s records, which go back to 2012, according to a new report from Redfin, a technology-powered real estate brokerage.
The housing market cooled considerably as mortgage rates climbed to their highest levels since 2009. Seasonally-adjusted home sales fell 3% month over month, their only May decline on record outside of 2020, when the start of the pandemic sent shock waves through the housing market.
Despite this decline in demand, the inventory of homes for sale still fell from a year earlier. As the market remains tight and new listings also decline, May saw the smallest drop in active listings since November 2019.
“The sudden and dramatic surge in mortgage rates has been a shock to the system for housing,” said Redfin chief economist Daryl Fairweather. “With inflation still at 40-year highs, mortgage rates are likely to stay elevated for a while, so the market will have to adjust to this new reality.”
She added, “The good news is that cheap debt is no longer fueling unsustainable home price growth, and existing homeowners are in a good position, holding record high home equity with debt financed at record low mortgage rates. Home buyers, however, are facing mortgage rates near 6%, which means the housing market slowdown will likely continue into the fall. But one silver lining is that home buyers are facing less competition for the first time in two years.”
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Competition
- Indianapolis was the fastest market, with half of all homes pending sale in just four days, the same as a year earlier. Denver; Omaha, Nebraska; Oklahoma City and Portland, Oregon were the next fastest markets, with five median days on market.
- In San Jose, California, 84.5% of homes sold above list price, more than any other metro Redfin analyzed. Next came 83.6% in Oakland; 79.3% in Worcester, Massachusetts; 76.3% in San Francisco; and 76% in Rochester, New York.
Prices
- North Port, Florida had the nation’s highest price growth, rising 30.5% since last year to $475,000. Tampa came next at 28.1%, followed by Las Vegas (26.8%), Knoxville, Tennessee (25.9%), and Orlando, Florida (25.8%).
- No metros saw price declines in May.
Sales
- Honolulu led the nation in year-over-year sales growth, up 5%, followed by Denver, up 4%. El Paso, Texas rounded out the top three, with sales up 3.7%.
- West Palm Beach, Florida saw the largest decline in sales since last year, falling 25.5%. Next came Lake County, Illinois (-22.9%) and Anaheim, California (-22.4%).
Inventory
- Elgin, Illinois had the highest increase in the number of homes for sale, up 35% year over year, followed by Chicago (18.9%) and Austin, Texas (15.6%).
- Allentown, Pennsylvania had the largest decrease in overall active listings, falling 46.3% since last May. It was followed by Greensboro, North Carolina (-35.2%), Bridgeport, Connecticut (-31.6%) and Hartford (-29.3%).
Redfin Estimate
- Miami (48.4%) had the largest share of homes predicted to sell for below list price, according to Redfin Estimate data, followed by Baton Rouge, Louisiana (40.6%) and Tulsa, Oklahoma (40.0%).
- Sacramento (90.8%) had the largest share of homes predicted to sell at or above list price, followed by Oakland (90.1%) and Worcester, Massachusetts (89.6%).