Although the market is currently red-hot, Redfin’s latest report released on Friday revealed that homebuyers may give up as home prices continue to grow.
The intensifying imbalance between supply and demand has pushed median home prices to an all-time high, according to Redfin’s latest real estate market report released on Friday.
March’s median home-sale price increased 17 percent annually to $335,613, which is the highest price since Redfin began tracking the market. Median asking prices broke records as well, with homesellers listing their homes for an average of $353,500. Despite the jump in asking prices, pending home sales and days on market data show there’s still more than enough demand to go around.
On a four-week rolling average, pending home sales increased 38 percent year over year to 57,996, with a staggering 59 percent of those sales going under contract in two weeks. Another 49 percent went under contract in one week — a 14 percent increase from last year.
To seal the deal, homebuyers are engaging in fierce bidding wars, with 41 percent of homes selling above the asking price. As a result, the average sale-to-list price ratio, which measures how close homes are selling to their asking prices, increased to another all-time high of 100.4 percent.
Although homesellers have been riding high due to the low-mortgage-rate-induced buyer boom, Redfin Chief Economist Daryl Fairweather said mortgage indicators signal more homebuyers may be placing their purchasing plans on the shelf until home prices cool.
“Some homebuyers have reached their limit on bidding wars and soaring prices,” Fairweather said in the report. “Add to the mix a dwindling number of homes for sale and rising mortgage rates, and the typical family that is still searching for an affordable house may have missed the boat.”
Seasonally-adjusted mortgage purchase applications for the week ending March 26 increased on an annual basis (+39 percent) but slid two percent week over week as 30-year mortgage rates increased to the highest level since June 2020 (3.18 percent).
In response to rising rates and dwindling new (-2 percent y-o-y) and active listings (-42 percent y-o-y), Fairweather said homebuyers will either drastically change their home must-haves or wait until the market balances in their favor.
“First-time homebuyers who were already stretching their budgets will have to make bigger compromises on size and location or resign to renting for another year,” she explained. “However, those who are flexible should look to the condo market where there’s still a bit less competition.”
Looking forward, Fairweather said President Biden’s infrastructure plan is a silver lining for homebuyers who desperately need a price break. Biden’s $2 trillion plan reserved $213 billion to “produce, maintain and retrofit more than two million affordable and energy-efficient and electrified housing units.”
“Biden’s infrastructure plan aims to incentivize zoning for multifamily homes, which could increase the supply of affordable homes and provide even more people a path to homeownership, but there is no guarantee the incentives would be enough for local governments to change their zoning practices,” she said.