While competition remains fierce and prices are still soaring, some indicators measured in a new Redfin study suggest the sizzling sellers' market is cooling.
Even as the median home-sale price increased 24% year over year to $358,766, a record high, speed of sales are up for the year but down month-over-month, and Google Trends search interest in homes for sale has declined for three weeks in a row as of May 30. Another indicator of moderate deceleration, the seasonally adjusted Redfin Homebuyer Demand Index—a measure of requests for home tours and other services from Redfin agents—was down 14% from the week ending April 11, and is just 3% above the same period last year.
"Many measures of the housing market, such as pending home sales, mortgage applications, and touring activity, showed some improvement this past week following the Memorial Day slump, but don't call it a comeback," said Redfin Lead Economist Taylor Marr. "Seasonally adjusted homebuyer demand is unlikely to rebound to the levels we saw earlier in the spring."
Real estate agents on the ground back up Marr's observations.
"Offers no longer pour in the day a home hits the market," said Phoenix agent John Biddle. "It has become more common for offers to come in at least a few days after a home is listed for sale. If this were three years ago, we'd marvel at how fast the market was, but it's a clear slowdown from a few weeks ago. Now that things are opening up again and the summer is almost here, people have other priorities, like going on vacation. Plus, many homebuyers are frustrated and tired of competing, so they've stepped back—for now at least."
A shortage of homes for sale remains problematic. Active listings (the number of homes listed for sale at any point during the period of the survey) fell 35% from 2020 and have been relatively flat since late February, Redfin reports.
Authors of a Harvard study say policymakers at all levels of government must work together to reduce barriers to homebuilding, writing that, "The Biden Administration’s proposal to link funding for affordable housing to state and local regulatory efforts provides a good template for how the federal government can incentivize these reforms."
Affordability issues go hand in hand with the insufficient supply-demand ratio. Redfin reports that a record 54% of homes sold above list price during its four-week study, up from 26% a year earlier. The average sale-to-list price ratio, which measures how close homes are selling to their asking prices, increased to 102.2%. In other words, the average home sold for 2.2% above its asking price. This measure is 3.7 percentage points higher than a year earlier and an all-time high.
"While some buyers will find reprieve in less intense bidding wars this summer," concludes Marr, "others may be disappointed that homes remain hard to find."
The full report is available at Redfin.com.