According to the latest report from Redfin, the Seattle-based real estate brokerage firm, seasonally adjusted new listings of homes for sale declined 8% month-over-month in August to their lowest level since May 2020, the third month of the COVID-19 pandemic. Prior to the pandemic, there hadn’t been so few homes listed in the market since November 2012.
At the start of August mortgage rates had climbed to 5%; however, by the end of August they had risen to near 6%. The increase in mortgage rates pushed many potential homebuyers out of the marketplace. The sharp decrease in demand left those buyers remaining in the market with additional negotiating leverage, which in turn modestly softened home prices and caused many potential home sellers to hold off listing their homes for sale.
The market as a whole today is relatively balanced between buyers and sellers, but there is very little activity in terms of homes being list and sold.
Adding additional background and her analysis, Dr. Daryl Fairweather, Redfin’s Chief Economist, said, “When mortgage rates were below 3%, sales and home prices soared. The market was like a game of musical chairs with buyers vying for too few homes. As mortgage rates approached 6%, almost everyone left the party. Now the market is more like a middle school dance where a small number of buyers and sellers are pairing up during a slow song.”
While we may be in a housing recession, the slowdown in sales is not a sign of a bubble bursting, Fairweather went on to explain. “The bottom line is that homeowners don’t need to sell in this environment. They locked in rock-bottom mortgage rates last year and are sitting on piles of equity. The jobs market remains very strong, so there’s little risk that mortgage delinquencies or foreclosures will rise significantly. It would take a severe—not soft—recession to send homeowners into distress. We will have to wait and see if the broader economy steers towards normalcy or recession in the upcoming months.”
FEA compiles the Wood Markets News from various 3rd party sources to provide readers with the latest news impacting forest product markets. Opinions or views expressed in these articles do not necessarily represent those of FEA.