Rising Costs Keeping Potential Homebuyers on the Sidelines 

Homebuying expenses have reached their highest point in over a year, as reported by Redfin, the real estate brokerage associated with Rocket.

The average monthly mortgage payment for U.S. homebuyers has hit a 14-month peak of $2,641. This increase is attributed to a 2.2% rise in the median home-sale price year over year, along with a rise in the weekly average mortgage rate to 6.71%.

These elevated costs are causing some potential buyers to remain on the sidelines. Pending home sales have remained virtually unchanged (+0.1%) from the previous week on a seasonally adjusted basis, hovering near their lowest level since February. Economic uncertainty is also playing a role in the weak demand. While buyers possess negotiating power in many regions, for numerous house hunters, this advantage does not sufficiently counterbalance the high costs.

New listings have decreased due to Labor Day, yet they remain higher than last year. There was a 4.8% decline in new listings from the previous week on a seasonally adjusted basis, primarily due to the timing of the Labor Day weekend. However, new listings are up 2.1% compared to a year ago, and the overall number of homes available for sale has also increased by 2.1%. Sellers are putting their homes on the market to avoid potential price declines, due to life changes necessitating a move, and because the lock-in effect is diminishing.

Sellers need to recalibrate their expectations. Just over one in five (20.8%) home listings experienced a price reduction, an increase from 19.8% a year prior, and the average home that sold was on the market for 46 days—one day longer than the previous year. With some buyers hesitant due to high costs and homes taking longer to sell, it is essential to price a home realistically from the outset.

“Pricing draws interest. Overpricing leads to hesitation,” said Vanessa Leimback, a Redfin Premier agent in Seattle.

Nevertheless, certain homes continue to generate competition. One-quarter (25.5%) of homes sold went for more than their asking price, a slight increase from 24.9% a year ago. Certain regions of the country, such as the suburbs of San Francisco and New York City, are experiencing competitive real estate markets. Redfin agents across the U.S. report that homes priced appropriately in sought-after areas continue to incite bidding wars.

Note: Redfin’s national metrics include data from 900+ U.S. metro areas and are based on homes listed and/or sold during the period. Weekly housing-market data goes back through 2021. Subject to revision.

The post Rising Costs Keeping Potential Homebuyers on the Sidelines  first appeared on The MortgagePoint.