A new Redfin report says home sales fell 35.1% year over year in November, the largest drop in sales since 2012.
Redfin attributes this seasonally adjusted fall in home sales to the surge in mortgage rates in early November, but the report also predicts demand will be restored as rates decline. Canceled home-purchase agreements in November saw a downward trend and mortgage applications increased.
Per the report, home-price growth has lost momentum as the median U.S. home-sale price rose by 2.6% from 2021, the smallest increase since May 2020.
In October, Redfin reported that new listings dropped to a year-over-year low of 19%. In November, new listings slumped 28.4% year over year, the highest recorded drop, with the exception of April 2020.
However, the overall supply rose by 4.6% from 2021, which Redfin says is an indication of homes staying on the market longer and a slowdown of demand. Homes took 37 days on average to go under contract, an increase from 23 days from last year.
HousingWire lead analyst Logan Mohtashami says the collapse in existing home sales reached lows similar to when the COVID-19 pandemic broke out and the economic turmoil in 2007. Inventory has been declining for four consecutive months, dropping to about 900,000 active listings, which is significantly below the lowest level of the four-decade average between 2 million and 2.5 million.
Redfin also reported that mortgage rates dropping below 6.5% in late November was a sign of easing inflation. Chen Zhao, economics research lead at Redfin, said we still have a long way until we recover completely and home sales could recede for a short time.
“The worst of inflation is likely in the rearview mirror,” Zhao added in a prepared statement. “We do anticipate that mortgage rates will decline slightly further in 2023 as the Fed’s actions continue to bring inflation down, which should ultimately bring more homebuyers back to the market.”
Zhao also said potential homebuyers in places like San Francisco and Austin should keep a lookout for turnarounds because there could be a rise in demand and competitive offers in the near future. Prices have decreased in these places since last year.
Las Vegas, which saw a boom during the pandemic, experienced the highest drop in home sales, down 51.8% year over year in November. Following this are Salt Lake City (-49.9%), San Jose (-50.1%), Stockton (-49.8%) and Oxnard (-48.7%) in California.
San Francisco led the drop in year-over-year declines in median sale prices with a decrease of 11.1%, followed by San Jose, Detroit, Pittsburgh and Boise, down between 2% and 3%.
Some places saw a rise in the number of homes for sale. For example, pandemic boomtowns like North Port and Tampa in Florida led the increase with active listings rising 61.3% and 46.1%, respectively. The report says this could be because Hurricane Ian compelled people to sell their homes. New listings rose on a monthly basis in North Port and Cape Coral, also hit by the storm.
After North Port and Tampa, Nashville (45.1%), New Orleans (40.2%) and Seattle (39.2%) saw the biggest increase in the number of homes for sale.
