Market Recovery Hampered by High Housing Costs, Low Supply in January

Rhea-AI Summary

Redfin reports a 0.5% increase in pending home sales for January, following December's 1.4% rise. Year-over-year, pending sales are down 29.4%. The median sale price in the U.S. is $383,249, reflecting a 1.4% decline from December but an increase of 1.5% from a year ago. The ongoing affordability crisis persists, alongside limited new listings, which fell 19.9% year-over-year. Closed sales saw a 36.6% drop compared to last year. The average mortgage rate is now 6.5%, contributing to a rising monthly payment of over $500 for typical homebuyers.

Positive

• Pending home sales rose 0.5% in January month-over-month.
• Year-over-year pending sales decline eased from 32.5% in December to 29.4% in January.
• Median sale price increased 1.5% year-over-year.

Negative

• Pending home sales fell 29.4% year-over-year.
• Closed home sales dropped 36.6% from a year earlier.
• New listings decreased 19.9% year-over-year.
• Average mortgage rates increased to 6.5%, raising monthly payments over $500 year-over-year.

Pending home sales improved slightly, but an ongoing affordability crisis and lack of homes for sale kept many house hunters on the sidelines

SEATTLE--(BUSINESS WIRE)-- (NASDAQ: RDFN) — Pending home sales rose 0.5% from a month earlier in January on a seasonally-adjusted basis, according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage. That compares with December's revised month-over-month increase of 1.4%, which was the first gain in 14 months.

Pending sales fell from a year earlier, but the decline eased for the second month in a row—to 29.4% in January from 32.5% in December and a record 35.5% drop in November. Redfin’s records date back to 2012.

“A dip in mortgage rates brought some buyers off the bench in January, but the housing-market recovery was tempered by still-high housing costs and a limited number of homes being listed for sale,” said Redfin Deputy Chief Economist Taylor Marr. “There were fewer new listings in January than at any point on record, with the exception of the start of the pandemic. That hampered demand because it meant that many of the buyers who were still in the market had a tough time finding a home that met their needs. The shortage of homes for sale also buoyed home prices.”

Marr continued: “The housing market took two steps forward in December and January, but has taken one step back in February. Mortgage rates crept back up this month, which is prompting more buyers and sellers to back off.”

Home-purchase applications dropped to the lowest level since 1995 last week as mortgage rates jumped on expectations that the Federal Reserve will need to raise interest rates again to combat inflation. The average 30-year-fixed mortgage rate is now 6.5%, up from an average of 6.27% in January and 3.89% a year ago. That has caused the typical homebuyer’s monthly payment to rise more than $500 year over year.

Closed home sales fell 1.4% from a month earlier in January and slumped a record 36.6% from a year earlier. In Redfin’s December market report, the company noted that the year-over-year decline in closed sales had eased slightly, but that didn’t continue into the new year. The large drop in closed sales is partly due to the fact that many of the home purchases that closed in January went under contract in the fall, when mortgage rates hit a 20-year high.

New Listings Hit Second-Lowest Level on Record as Sellers Held on to Low Rates

New listings fell 1.6% from a month earlier in January and dropped 19.9% from a year earlier. While that’s an improvement from the 25.3% year-over-year decline in December—the largest drop on record aside from the pandemic start—listings remained scarce. There were fewer new listings in January than any other month on record aside from April 2020, when the onset of the pandemic brought the housing market to a halt.

Many homeowners are reluctant to sell because they don’t want to give up their relatively low mortgage rates. About 85% of mortgage holders have a rate far below today’s level of roughly 6%. Homeowners are also hesitant to put their homes on the market due to soft homebuyer demand that’s forcing sellers to cut prices. The median sale price of U.S. homes was $383,249 in January, down 1.4% from December and 11.5% below the May all-time high. Still, prices were up 1.5% from a year earlier, in part because low supply kept prices afloat.

Almost one in every five home listings (17.7%) had a price drop last month. While that’s down from the record high of 22.2% in October, it’s up from 7% in January 2022—the largest year-over-year increase on record. Just 21.2% of homes sold above their final list price, the lowest level in two years.

“Nice homes that are priced fairly are selling, but homes that are overpriced or poorly maintained are lingering on the market,” said Shay Stein, a Redfin real estate agent in the Las Vegas area. “A lot of sellers who don’t get the price they had hoped for are taking their homes off the market. Many of them have a rock-bottom mortgage rate and figure they can wait to sell.”

The typical home that sold was on the market for 51 days—the highest level since February 2020. That’s up from 27 days in January 2022. Homes are taking longer to sell in part because homebuyer competition has dwindled. Roughly two of every five home offers (42.1%) written by Redfin agents faced a bidding war in January, the lowest level since April 2020. That’s down from 43.1% a month earlier and 68% a year earlier. Pandemic boomtowns including Austin and Tampa saw among the largest declines in competition, as many homebuyers have been priced out.

With many homes now lingering on the market, overall housing supply has ticked up. While active listings fell 1.2% from a month earlier in January, they were up 14.5% from a year earlier—just shy of the 15% record year-over-year gain in December. Active listings hit a record low in January 2022, which is one reason the year-over-year increase is so dramatic.

National Highlights

	January 2023	Month-Over-Month Change	Year-Over-Year Change
Median sale price	$383,249	-1.4%	1.5%
Pending home sales, seasonally adjusted	397,838	0.5%	-29.4%
Homes sold, seasonally adjusted	405,602	-1.4%	-36.6%
New listings, seasonally adjusted	475,381	-1.6%	-19.9%
All homes for sale, seasonally adjusted	1,606,974	-1.2%	14.5%
Months of supply	3.2	0.7	1.7
Median days on market	51	7	24
Share of for-sale homes with a price drop	17.7%	3.3 ppts	10.7 ppts
Share of homes sold above final list price	21.2%	-1.9 ppts	-21.3 ppts
Average sale-to-final-list-price ratio	97.8%	-0.2 ppts	-2.6 ppts
Share of home offers written by Redfin agents that faced competition, seasonally adjusted	42.1%	-1 ppt	-25.9 ppts
Pending sales that fell out of contract, as % of overall pending sales	14.1%	-2.1 ppts	2 ppts
Average 30-year fixed mortgage rate	6.27%	-0.09 ppts	2.8 ppts

Note: Data is subject to revision

Metro-Level Highlights

• Pending sales: In Baton Rouge, LA, pending sales fell 62.4% year over year, more than any other metro Redfin analyzed. It was followed by Honolulu (-60%), New Orleans (-54.7%), Las Vegas (-52.6%) and Phoenix (-48.8%). Pending sales rose in just five metros: Cincinnati (29.7%), Lake County, IL (19.7%), Chicago (10.1%), Detroit (4.7%) and Rochester, NY (3.6%).
• Prices: Median sale prices fell from a year earlier in 29 metros, led by San Francisco (-9.4%). Next came Honolulu (-8%), Detroit (-8%), Oakland, CA (-7.8%) and Fresno, CA (-6.7%). The biggest increases were Indianapolis (13.1%), West Palm Beach, FL (13.1%), Greensboro, NC (12.5%), Dayton, OH (11.1%) and Allentown, PA (10.7%).
• Listings: New listings fell the most from a year earlier in Greensboro (-43.6%), Allentown (-42.5%), Sacramento, CA (-40.6%), San Diego (-38.7%) and San Jose, CA (-38.4%). They rose in six metros: North Port, FL (12.5%), McAllen, TX (8.3%), Nashville, TN (5.4%), West Palm Beach (1.4%), Austin, TX (1.1%) and Dallas (0.8%).
• Supply: Active listings rose the most from a year earlier in North Port (95.5%), Austin (75.6%), Nashville (73.5%), Fort Worth, TX (64.5%) and Dallas (64.4%). They fell the most in Greensboro (-28.8%), Milwaukee (-25.6%), Allentown (-24%), Hartford, CT (-21.9%) and Bridgeport, CT (-18.7%).
• Competition: In Austin, 28.7% of home offers written by Redfin agents faced competition, down 47.7 ppts from a year earlier—the largest decline among the 33 metros Redfin analyzed. Other pandemic boomtowns rounded out the top five: Raleigh, NC (-47.3 ppts), Tampa, FL (-46.2 ppts), Honolulu (-42 ppts) and Colorado Springs, CO (-41.4%). Competition fell the least in Worcester, MA (-5 ppts), Providence, RI (-6 ppts), New York (-9.3 ppts), Boston (-10.7 ppts) and Washington, D.C. (-12.5 ppts).

To view the full report, including charts, additional metro-level data on competition and home-purchase cancellations, as well as methodology, please visit: https://www.redfin.com/news/housing-market-tracker-january-2023.

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 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. Since launching in 2006, we've saved customers more than $1 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/20230224005102/en/

Redfin Journalist Services:

Ally Braun, 206-588-6863

press@redfin.com

Source: Redfin

FAQ

What were the pending home sales figures for January 2023 for RDFN?

Pending home sales for January 2023 rose by 0.5%, amounting to 397,838 sales.

How did the median sale price change for U.S. homes in January 2023?

The median sale price for homes in January 2023 was $383,249, which was 1.4% lower than December but 1.5% higher than the previous year.

What is the year-over-year change in closed home sales reported by RDFN?

Closed home sales fell by 36.6% year-over-year in January 2023.

How much did new listings decline in January 2023 for RDFN?

New listings declined by 19.9% year-over-year in January 2023.

What is the current average mortgage rate affecting homebuyers according to RDFN?

The average mortgage rate is currently 6.5%, causing typical monthly payments to increase by over $500 year-over-year.