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Homebuying Demand Slips Below 2020 Levels

According to the Redfin Homebuyer Demand Index—a measure of requests for home tours and other homebuying services from Redfin agents covering the four-week period ending June 20—has fallen below 2020 levels for the first time in 2021 (-1% year-over-year for the week ending June 20), as the Mortgage Bankers Association (MBA) home purchase index has seen a decline of 11% since the week ending March 24.

As a result of sales on the decline, the active supply of homes for sale has crept up 5% from the 2021 low in mid-March. However, with home prices still at record highs, homes continue to spend less time on the market, as fierce bidding wars continue to drive prices above their listing price.

Of the 400+ U.S. metro areas surveyed by Redfin, the median home-sale price increased 23% year-over-year to $361,750, a record high. Asking prices of newly-listed homes were up 13% from the same time a year ago to a median of $362,600, down 0.2% from $363,250 during the four-week period ending June 6.

And in terms of those aforementioned bidding wars, homes that sold were on the market for a median of 15 just days, a new all-time low, down from 39 days a year earlier (note much of the nation was under stay-in-place orders this time last year due to the pandemic). Approximately 55% of homes that went under contract had an accepted offer within the first two weeks on the market, more than the 44% rate during the same period a year ago, but down 1.7 percentage points from the high point of the year, set during the four-week period ending March 28. Pending home sales were up 21% year-over-year, and for the week ending June 20, pending sales were down 10% from the 2021 peak during the week ending May 30. New listings of homes for sale were up 6% over 2020, and have declined 5% from the 2021 peak during the four-week period ending May 23.

The average sale-to-list price ratio, a metric that measures how close homes are selling to their asking prices, increased to 102.3%. In other words, the average home sold for 2.3% above its asking price. This measure is 3.8 percentage points higher than a year earlier and an all-time high.

One factor that may keep prospective buyers still in the hunt is mortgage rates that only just surpassed the 3% mark. For the first time in 10 weeks, Freddie Mac reported rates rising to 3.02%, still a historically low mark, and still in refi-friendly territory.

The MBA also released its weekly applications survey last week, finding that the share of overall refi volume at 62.5% of total application volume, up from 61.7% the previous week.

“Some homebuyers are pausing or abandoning their plans to buy because homes in their area have gotten too expensive,” said Redfin Chief Economist Daryl Fairweather. “Even though there are no signs of prices coming down, homebuyers may face a bit less competition and have a bit more selection of homes this summer than they did earlier this year. All year, we’ve heard stories about homeowners being reluctant to sell because they don’t want to face such a tough market as a buyer. As the housing market cools slightly, we may see more homeowners finally decide to cash out and move. And as the economy continues to reopen and employers clarify their work-from-home policies, more homeowners may decide that a move is in order.”

About Author: Eric C. Peck

Eric C. Peck has 20-plus years’ experience covering the mortgage industry, he most recently served as Editor-in-Chief for The Mortgage Press and National Mortgage Professional Magazine. Peck graduated from the New York Institute of Technology where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books and has served as Copy Editor for Entrepreneur.com.
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