Homebuyers Find Only Short-Lived Relief in the Market

September was a good month for homebuyers seeking relief from rising prices, but data released this week by Redfin suggests that may be short-lived. 

There are early signals that demand is picking back up again in the first weeks of November, the real estate brokerage said.

“The severe lack of inventory is restricting home sales,” Redfin Chief Economist Daryl Fairweather said in prepared remarks. “Even though plenty of people bought homes last year, many homebuyers waited while the pandemic went from bad to worse and remote-work policies were finalized. The homebuyers who are just beginning their search are finding that the well has run dry.”

Fairweather said he is hopeful that as it becomes easier to get building materials, there will finally be a strong year for new construction in 2022.

“That’s what the market needs more than anything,” he said.

Only one of the 85 largest metros tracked by Redfin posted a year-over-year increase in the number of seasonally adjusted active listings of homes for sale: Tacoma, WA (+2%). The biggest year-over-year declines in active housing supply in September were in Baton Rouge, La. (-50%), Salt Lake City (-50%) and North Port, Fla. (-41%).

Seasonally adjusted active listings—the count of all homes that were for sale at any time during the month—fell 19% year over year in October, on par with recent months.

Affordability Remains a Challenge

Olivia Mariani, head of Marketing at Curbio, doesn’t necessarily agree with the premise that the housing market woes will be solved by new construction. “While an increase in new construction would obviously increase housing inventory, it’s not going to do much in the way of helping buyers with affordability,” she tells GlobeSt.

“Building a brand-new home is significantly more expensive than making updates to the existing housing footprint. Additionally, while there are fewer homes on the market—as we expect around this time of year—part of the issue has less to do with overall inventory, and more to do with the lack of the move-in-ready inventory that buyers want.”

October Marks 15 Straight Months of Double-Digit Gains

Indeed, the median price of homes sold in October was $378,700, according to the Redfin report. This is up 13% from a year earlier, the lowest growth rate since December 2020.

October marked the 15th consecutive month of double-digit price gains. Seasonally-adjusted closed home sales and new listings of homes for sale both fell from a year earlier, by 8% and 11%, respectively. Overall, the housing market experienced fairly typical seasonal cooling in October. 

Median sale prices increased from a year earlier in all but one of the 85 largest metro areas Redfin tracks: Bridgeport, Conn. (Fairfield County), where prices were down 4.2%. 

A year ago, home price gains in Bridgeport had peaked at 40% while the area rode a wave of in-migration of homebuyers leaving New York City. Price declines over the past few months are likely a continued cooling from an extremely overheated state. The largest price increases in October 2021 were in Phoenix (+25%), Austin (+25%) and McAllen, Texas (+24%).

Homes Sold Under Contract in 21 Days

Seasonally-adjusted home sales in October were down 8% from a year earlier, the largest decline in 16 months. Home sales fell in 76 of the 85 largest metro areas Redfin tracks. The biggest sales declines were seen in Bridgeport, Conn. (-26%), New Brunswick, N.J. (-22%) and Salt Lake City (-21%). The largest gains were in places where sales were still somewhat depressed in October 2020, including Honolulu (+18%), New York (+11%), and San Jose (+7%).

The typical home that sold in October went under contract in 21 days—more than a week faster than a year earlier, when homes sold in a median 29 days, but up three days from the record low of 15 days in June. In October, 46% of homes sold above list price, down 11 percentage points from the record high in June, but up 11 percentage points from a year earlier. The average sale-to-list price ratio also dipped slightly in October to 100.8%, down from a record high of 102.6% in June but up from 99.5% a year earlier.