Monthly housing payments hit a new record high this week as mortgage rates jumped, pricing out many homebuyers, especially those with limited budgets

(NASDAQ: RDFN) — Housing payments hit a new high this week as mortgage rates jumped due to progress on a possible debt-ceiling deal. That’s according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage.

Daily average rates hit 7.12% on May 25, reaching their highest level since November. The typical U.S. homebuyer’s monthly mortgage payment hit a record-high $2,614 at a 6.57% mortgage rate, the current weekly average.

The rate increase dampened homebuying demand. Pending home sales dropped 17.4% nationwide from a year earlier during the four weeks ending May 21, the second-biggest dip since January (the biggest was a 17.5% decline in early April). Mortgage-purchase applications declined too, dropping 4% from the week before.

Potential sellers continued backing off, with new listings of homes for sale dropping 24%, one of the biggest declines since May 2020. That’s because homeowners continue to hang onto their homes, locked in by comparatively low rates. Even though demand is down, it’s still outpacing supply as the new-listing drought has caused the total number of homes for sale to post an annual decline (-0.9% YoY) for the first time in nearly a year.

Despite rates jumping past 7% and a lack of new listings, many early-stage homebuyers remain committed. Redfin’s Homebuyer Demand Index, which measures requests for tours and other services from Redfin agents, increased from a week earlier and is essentially flat (-1%) from a year earlier. Some of these house hunters are likely to continue moving forward, while others may wait for rates to decline before securing loans. We may see a burst of pent-up demand when and if rates dip again.

“People may be wondering why rates are surging as we come up against a potential debt crisis. Right now, the way investors are reacting is the driving force. Mortgage rates have increased over the past two weeks because it looks more likely that the U.S. government will avoid hitting the debt ceiling,” said Redfin Economics Research Lead Chen Zhao. “That may seem counterintuitive, but optimism is driving rates up because an economic crisis would lead to the Fed lowering rates as they try to prevent a recession. Financial markets felt the risk of default was unusually high for the last month or so, which caused rates to stay lower than they otherwise would have been. Now that Democrats and Republicans have come to the negotiating table and are making some progress toward a deal, rates are going up.”

Mortgage rates passing 7% have varying impacts on homebuyers: Some are priced out, others are unfazed

In the Seattle area, different buyers are reacting differently to mortgage rates surpassing 7%. Redfin Premier agent Hal Bennett, who works with buyers and sellers in pricey eastside suburbs like Bellevue and Sammamish, said buyers are shying away this week as rates tick past the 7% mark. But Bliss Ong, a Redfin Premier agent who works mainly in the city of Seattle, says the 7% number doesn't present the same psychological barrier for her buyers that it did back in fall 2022.

"Rates hitting 7% is pushing some homebuyers entirely out of the market, especially those with lower budgets. But a lot of them are just pushing their price range down," Ong said. "The 7% number isn’t scaring away buyers as much as it did back in the fall. The housing market is different now because buyers are used to rates in the 6% range, and some of them are even motivated to secure a loan now in case rates rise further."

Jacksonville, FL Redfin Premier agent Heather Kruayai reports that in her area, it’s the most expensive homes that are most popular in today’s market. “Affordable listings are getting stale, but expensive ones are selling quickly. That’s usually because those buyers can lessen the impact of high rates by making huge down payments or paying in all cash,” Kruayai said. “Other than cash buyers moving in from out of town, the only people buying and selling are the people who need to because they’re retiring or going through another major life change.”

Leading indicators of homebuying activity:

• For the week ending May 25, the average 30-year fixed mortgage rate was 6.57%, up from 6.39% the week before. That’s the biggest weekly jump since February. The daily average hit 7.01% on May 23 and 7.12%—the highest level since November—on May 25.
• Mortgage-purchase applications during the week ending May 19 decreased 4% from a week earlier, seasonally adjusted, hitting their lowest level in 11 weeks. Purchase applications were down 30% from a year earlier.
• The seasonally adjusted Redfin Homebuyer Demand Index—a measure of requests for home tours and other homebuying services from Redfin agents—was up from a week earlier and essentially unchanged from a month earlier during the week ending May 21. It was down just 1% from a year earlier, the smallest decline in a year.
• Google searches for “homes for sale” were down slightly from a month earlier during the week ending May 20, and down about 13% from a year earlier.
• Touring activity as of May 20 was up 23% from the start of the year, compared with a 10% increase at the same time last year, according to home tour technology company ShowingTime. The fact that the jump is bigger so far in 2023 than 2022 reflects homebuying demand dampening around this time last year as mortgage rates rose.

Key housing market takeaways for 400+ U.S. metro areas:

Unless otherwise noted, this data covers the four-week period ending May 21. Redfin’s weekly housing market data goes back through 2015. For bullets that include metro-level breakdowns, Redfin analyzed the 50 most populous U.S. metros. Select metros may be excluded from time to time to ensure data accuracy.

• The median home sale price was $375,750, down 2.2% from a year earlier, the smallest decline in nearly two months. Prices are up about 8% from the start of the year, a typical seasonal increase.
• Home-sale prices declined in 29 metros, with the biggest drops in Austin, TX (-18.3% YoY), Oakland, CA (-15.9%), Las Vegas (-10.4%), San Francisco (-10.3%) and Sacramento (-8.8%).
• Sale prices increased most in Cincinnati, OH (8.5%), Milwaukee (8.1%), Fort Lauderdale, FL (6.8%), Newark, NJ (6.7%) and Columbus, OH (4.8%).
• The median asking price of newly listed homes was $398,975, down 0.2% from a year earlier.
• The monthly mortgage payment on the median-asking-price home hit a record high of $2,614 at a 6.57% mortgage rate, the current weekly average. That’s up 13% ($265) from a year earlier.
• Pending home sales were down 17.4% year over year, the second-biggest decline since January (the biggest was a 17.5% decline during the four weeks ending April 16).
• Pending home sales fell in all metros Redfin analyzed. They declined most in Seattle (-33.1% YoY), San Diego (-32.4%), Portland, OR (-30.5%), Sacramento, CA (-30.3%) and Milwaukee (-30.3%).
• New listings of homes for sale fell 24.1% year over year, one of the biggest declines since May 2020.
• New listings declined in all metros Redfin analyzed. They fell most in Seattle (-41.7% YoY), Las Vegas (-41.5%), San Diego (-39.7%), Oakland (-39.5%) and Anaheim, CA (-38.3%).
• Active listings (the number of homes listed for sale at any point during the period) were down 0.9% from a year earlier, the first decline in 12 months. Active listings also fell slightly (about -0.3%) from a month earlier; typically, they post month-over-month increases at this time of year.
• Months of supply—a measure of the balance between supply and demand, calculated by the number of months it would take for the current inventory to sell at the current sales pace—was 2.6 months, up from 2 months a year earlier. Four to five months of supply is considered balanced, with a lower number indicating seller’s market conditions.
• 34.7% of homes that went under contract had an accepted offer within the first two weeks on the market, down from 41% a year earlier and up from 33% a month earlier.
• Homes that sold were on the market for a median of 30 days, the shortest span since September. That’s up from a near-record low of 19 days a year earlier.
• 33.9% of homes sold above their final list price. That’s the highest share since September but is down from 54% a year earlier.
• On average, 5.2% of homes for sale each week had a price drop, up from 3.7% a year earlier.
• The average sale-to-list price ratio, which measures how close homes are selling to their final asking prices, was 99.6%. That’s the highest level since August but is down from 102.6% a year earlier.

To view the full report, including charts, please visit: https://www.redfin.com/news/housing-market-update-pending-sales-drop-mortgage-rates-pass-7

About Redfin

Redfin (www.redfin.com) is a technology-powered real estate company. We help people find a place to live with brokerage, rentals, lending, title insurance, and renovations services. We sell homes for more money and charge half the fee. We also run the country's #1 real estate brokerage site. Our home-buying customers see homes first with on-demand tours, and our lending and title services help them close quickly. Customers selling a home in certain markets can have our renovations crew fix up their home to sell for top dollar. Our rentals business empowers millions nationwide to find apartments and houses for rent. Customers who buy and sell with Redfin pay a 1% listing fee, subject to minimums, less than half of what brokerages commonly charge. Since launching in 2006, we've saved customers more than $1.5 billion in commissions. We serve more than 100 markets across the U.S. and Canada and employ over 5,000 people.

For more information or to contact a local Redfin real estate agent, visit www.redfin.com. To learn about housing market trends and download data, visit the Redfin Data Center. To be added to Redfin's press release distribution list, email press@redfin.com. To view Redfin's press center, click here.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230525005881/en/