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Surging mortgage rates are once again pushing homes into unaffordable territory for homebuyers, and it’s making the process of pricing a home even more complicated.
The monthly payment required to finance the purchase of a typical home rose from $2,210 in August to $2,547 in September — a 15 percent rise in only a few weeks — as mortgage rates shot back up to 6.7 percent, according to a report Thursday from Redfin.
This means when homesellers and their agents look at recent sales of comparable properties, they risk falling into unusual pitfalls, according to Redfin Deputy Chief Economist Taylor Marr.
“Sellers should anticipate that buyers are unwilling or unable to pay a price similar to what their neighbor’s home sold for a month ago, and buyers should connect with their lenders to find ways to mitigate the impact of rising rates,” Marr said in the report.
Unless a home is a clear cut above its comps in the neighborhood, the seller may need to consider that buyers won’t find it as affordable as some recently sold homes in the same area. In some cases, a strategy shift may be in order, a Redfin executive said.
“It’s imperative for home sellers to react quickly and aggressively as the market turns,” Jason Aleem, Redfin’s senior vice president of real estate operations, said in the report. “This means adjusting your pricing immediately if you want to be competitive and attract offers from a smaller pool of qualified homebuyers.”
Across the country asking prices have actually ticked upward in September, even as affordability worsened for buyers. But at the same time, more sellers have also been forced to drop their asking prices.
About 1 in 13 home listings had a price cut during the four weeks ending Sept. 25, a share of listings twice as big as what Redfin saw this time last year.
Still, sellers have yet to completely lose their grip on the market.
In that same four-week span, the supply of homes was back up to three months of inventory as the pace of sales continued to slow. For most of the pandemic, there had been only two months of inventory available at a time.
The traditional definition of a balanced market is six months of inventory, with anything lower than that considered to favor sellers.
Months of inventory continued to climb even as the number of active listings on the market ticked slightly downward. But homes sat on the market for longer than they have in years — 31 days typically. That’s a full week longer than it took for homes to sell at the same point last year.
