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Redfin: Some home listing prices drop amid ‘softening’ demand. But is it enough for a market correction?

SHARE Redfin: Some home listing prices drop amid ‘softening’ demand. But is it enough for a market correction?
Homes in Cottonwood Heights are pictured on Friday, April 15, 2022.

Homes in Cottonwood Heights are pictured on Friday, April 15, 2022. Homebuying demand continues to falter this spring as new listings fell 7% from a year earlier. The average 30-year fixed mortgage rate shot up to 5% and the median asking price climbed to $397,747.

Jeffrey D. Allred, Deseret News

Early data is showing signs the national housing market may be beginning to soften as spiking mortgage interest rates impact buyer demand.

But that doesn’t necessarily mean home prices are about to drop, especially for high-demand areas like Utah. Here, where a yearslong housing shortage has pushed inventory extremely low, experts have said rising mortgage rates will likely only slow — not stop — housing price increases while pricing out even more potential homebuyers.

As the average lending rate for a 30-year fixed rate mortgage hit 5% this week in the wake of the Federal Reserve’s upward adjustments, homebuyer demand is beginning to falter — and that’s pushing more sellers to drop their asking prices, according to a new report released Thursday by the national real estate brokerage site Redfin.

Early signs of a ‘softening’ housing market

Even though spring is typically a time when more sellers and buyers turn their eyes to the market, new listings this spring fell 7% from a year earlier as the median asking price climbed to $397,747, up 14% year over year. That sent the typical homebuyer’s monthly payment up 35% year over year, from when mortgage rates were just over 3%, to an all-time high of $2,288, Redfin reported.


The Redfin report, which used data from over 400 U.S. metro areas during a four-week period ending Sunday, also cited several early indicators “that tell us demand is softening at a time of year it typically springs up.” Those include:

  • Fewer people searched “homes for sale” earlier this month. Searches during the first full week of April were down 3% from this time last year.
  • Redfin’s seasonally adjusted Homebuyer Demand Index — a measure of requests for home tours and other homebuying services from Redfin agents — also declined 3% in the past four weeks, compared to a 5% increase during the same period in 2021.
  • Mortgage purchase applications were down 6% from last year, while the seasonally adjusted index increased 1% week over week during the week ending April 8.

Redfin is also watching “the accelerating share of home listings with price drops, which is climbing at its fastest spring pace since at least 2015, another sign that demand is not meeting sellers’ expectations,” the report stated.

How many sellers are lowering their prices?

Some other key findings in the report include:

  • On average, 3.2% of homes for sale each week had a price drop, with 13% dropping their price in the past four weeks. That’s up from 10% a month earlier and 9% from a year ago.
  • The share of listings with price drops is climbing faster during this time of year than they have since 2015. Typically, during this time of year, the share of homes with price drops is slightly down month over month.
  • Active listings or the number of homes listed for sale fell 23% year over year.

“There really is a limit to homebuyer demand, even though the market over the past few years has made it seem endless,” Daryl Fairweather, Redfin chief economist, said in the report.

“The sharp increase in mortgage rates is pushing more homebuyers out of the market, but it also appears to be discouraging some homeowners from selling.”

But that doesn’t mean the U.S. housing market is about to drastically change.

“With demand and supply both slipping, the market isn’t likely to flip from a seller’s market to a buyer’s market anytime soon,” Fairweather said.

Bidding wars, lightning-fast sales continue

Despite these early signs of a cooling housing market, the Redfin report noted the market still feels “as hot as ever for homebuyers” as homes continue to be snatched up at shocking speeds amid bidding wars and record price increases.

Homes sold were only on the market for a median of 18 days, down from 26 days a year earlier, according to the Redfin report.

Plus, 45% of homes that went under contract found a buyer within one week, and the average home that sold went for 2.4% above its asking price, the Redfin report stated.

“If a home is on the market for more than a week, people start to wonder why or assume something is wrong with it,” Redfin Boston real estate agent James Gulden said in the report.

Bidding wars continue to add stiff competition, with 54% of homes sold above the listing price, up 42% a year earlier and just shy of an all-time high seen in July 2021, according to Redfin’s report.

But some buyers are getting sick of playing the game.

“Every offer I’ve written recently has faced multiple offers, but some people have finally had enough of all the competition and are pulling out,” Gulden said. “They’re becoming less willing to make a risky offer in a high-stress bidding war situation.”