Real estate technology firm Redfin has reported a drop in U.S. home sales in October, the first month in three years with such a decline.
As the company reviewed the data, including mortgage rate volatility, it offered a cautious prediction.
“Home sales fell as mortgage rates surpassed 7% — but flattening prices could bring buyers a bit of relief,” Redfin data journalist Dana Anderson wrote.
Chen Zhao, Redfin’s head of economics research, also suggested that a similar change may be forthcoming.
“It’s a buyer’s market, but not many people can afford to buy,” Zhao wrote. “That could start to shift a bit, now that sale prices are closer to reflecting the shape of the market.”
Redfin wants homebuyers to be aware of a strategy that might be worth considering in a housing market with these characteristics.
“House hunters in most of the country should know that the price they see on a listing may very well be a starting point,” Zhao wrote. “They should try offering below the asking price, and negotiating for closing costs, repairs and maybe even mortgage-rate buydowns.”
“If you can’t get the price or monthly payment you want on one house, move on to the next one — with a big pool of inventory sitting on the market, buyers can afford to be picky,” she added.
Inflation report impacts daily mortgage rate
On Nov. 5, the average weekly 30-year fixed-rate mortgage (FRM) stood at 7.18%, according to Freddie Mac.
As I reported on Nov. 10, mortgage rates continued their downward trajectory that week, improving the environment for prospective homebuyers against a backdrop of strong economic growth.
Read more: Mortgage rates are moving, but the Fed may have other plans
Matthew Graham of Mortgage News Daily (MND) noted that a healthy mortgage rate trend seemed to be interrupted by a report on a key inflation indicator released Nov. 11.
“In October, the Consumer Price Index (CPI) for All Urban Consumers rose 0.4 percent, seasonally adjusted (SA),” reported the Bureau of Labor Statistics (BLS). “The index for all items less food and energy rose 0.3 percent in October (SA).”
Taking this new inflation news into account, Graham added some insight into mortgage rate movement.
“Rates enjoyed a remarkably calm winning streak over the past month with the worst single day resulting in a 0.06% increase for a top tier 30yr fixed loan and the average day seeing a 0.02% decline,” Graham wrote. “That streak was dealt its first serious blow today following a hotter than expected in the Consumer Price Index (CPI) — a key inflation report.”
“Given that the Fed explicitly said it was more focused on the inflation component of its job description at the moment (as opposed to the ‘full employment’ component), we were expecting today’s data to carry far more weight than last week’s jobs report,” he added.
“The reaction was logical and immediate. When the dust settled, the average top tier 30yr fixed rate was 0.12% higher day over day at 7.30%.”
Given the mortgage rate environment, real estate technology company Zillow had a sobering housing market prediction.
“The acute sting of suddenly higher mortgage rates is having the unfortunate effect on the housing market that last month’s pending sales data foretold,” said Mischa Fisher, Zillow chief economist. “November is shaping up to have an even larger contraction.”
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Redfin outlines recent home-sale price trends
Even so, it’s worth looking at the relatively welcome home-price developments Redfin shared.
For three straight years, U.S. home prices climbed year-over-year every single month, holding steady despite rising mortgage rates and retreating buyers. That run is finally over.
“The median home-sale price declined 0.4% year over year to $388,634 in October,” Redfin reported. “That’s the first decline since May 2023 and a sharp slowdown from the 2.5% gain just two months earlier.”
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“With Americans’ wages growing about 4% year over year, even a slight dip in prices can improve affordability,” Redfin continued. “Sale prices have risen nearly every single month for the last 13 years; the only exception was a handful of months in 2023.”
Redfin believes these developments reflect positive momentum for homebuyers.
“With the total number of homes for sale at its highest level since early 2020 and demand cooling, homebuyers’ negotiating power keeps increasing,” Redfin wrote.
“And that’s finally showing up in sale prices.”
Related: Zillow shares sobering prediction for housing market, mortgage rates
