Redfin News

Slowdown in U.S. housing market means buyers can start haggling again

Let the negotiations begin.

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After a crazy two-year run, the U.S. housing market is in a slowdown, with home sales seeing their biggest drop since the pandemic, dipping to levels not seen since April 2020.

And according to a market report by Redfin, it's probably going to stay that way through the end of 2022.

The drops include pending home sales and new home-for-sale listings: Pending sales were down 32 percent year over year, the biggest decline since April 2020; new listings were down 19 percent from a year earlier, the biggest decline since May 2020.

Mortgage applications also dropped to their lowest level in 25 years, according to the Mortgage Bankers Association.

The reason: Mortgage rates have risen to nearly 7 percent, the highest they've been in 20 years - leaving houses to sit on the market while buyers wait for the rates to drop.

"The U.S. housing market is at another standstill, but the driving forces are completely different from those that triggered the standstill at the start of the pandemic," says Redfin researcher Chen Zhao. "This time, demand is slumping due to surging mortgage rates, but prices are being propped up by inflation and a drop in the number of people putting their homes up for sale. Many Americans are staying put because they already relocated and scored a rock-bottom mortgage rate during the pandemic, so they have little incentive to move today."

Homes are taking twice as long to sell as they did in the spring, forcing sellers to drop their asking price. The typical home is selling for 1 percent less than its final asking price – the biggest discount since August 2020.

“With rates sitting above 6.5% for three weeks and no indication they’ll come down before the end of the year, people are only buying and selling homes if they need to,” Zhao says.

Some of the data Redfin used to calculate the slump, covering the four-week period ending October 16, includes:

Fewer Google searches for "homes for sale" - down 32 percent from a year earlier.
Touring activity was down 25 percent from the start of the year, compared to an 8 percent increase at the same time last year, according to home tour technology company ShowingTime.
Mortgage purchase applications were down by 4.5 percent to their lowest level since 1997.

There are now more houses on the market. Months of supply rose to 3.1 months - the highest level since June 2020. Austin saw the largest increase in the number of homes for sale, up 41.4 percent year over year.

And homes that sold were on the market for 34 days, up more than a full week from 26 days a year earlier and the record low of 17 days set in May and early June. Typical time on market has steadily increased since June.

Nearly 8 percent of homes for sale in mid-October had price drops, and only 30 percent of homes sold above final list price - down from 44 percent a year earlier and the lowest level since August 2020.

Zhao says that homes will eventually sell, but it may take a few months, and suggests that buyers can go back to negotiating the sale price, which would have been unheard of just a few months ago.

home for sale

living single

Dallas lands among 10 most affordable U.S. metros for living alone

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In DFW, renters can afford to live solo.

Not everyone is cut out for living with roommates, but finding an affordable place to live alone can be tricky. Luckily, Dallas-Fort Worth sits among the top 10 most affordable U.S. metros for living by yourself, according to a new report.

Analysts at Apartments.com discovered North Texas renters spend the seventh lowest share of their monthly income on single-bedroom rent out of the 50 biggest metros in the U.S.

The study used a 30 percent "common budgeting guideline" to calculate the share of median renter household income spent on one-bedroom asking rents across the 50 largest U.S. metros, and determined renters can only afford to live alone in 24 of the 50 metros without crossing the 30 percent threshold.

The median annual income of a DFW renter household is $63,172, and the findings show the typical asking rent for a one-bedroom apartment comes out to $1,348 per month. The study determined single renters spend 25.6 percent of their monthly income on rent based on the budgeting suggestion.

Texas' favorable rental market also extends outside of the Dallas-Fort Worth Metroplex: Austin surprised as the No. 1 most affordable metro for living alone, and San Antonio appeared among the top 10.

Austin renters spend the smallest share of their income on single-bedroom apartment rent, at 23.1 percent. That's based on a median renter household income of $70,008 and a $1,348 monthly one-bedroom asking rent price.

Dwindling rent prices and the prevalence of major tech employers are also attracting new renters, and the city has an 11.6 percent apartment vacancy rate.

"The average rent in Austin has decreased year over year, and construction of new housing increased by 30 percent over the past decade," the report's author wrote. "Tax incentives in Texas draw large tech corporations, like Google and Apple, to the Austin area, which has increased average wages, added more jobs to the local economy, and attracted renters in the process."

San Antonio ranked right above DFW in sixth place nationwide with solo renters spending 25.4 percent of their monthly income on single-bedroom rent, coincidentally the same share as single renters living in Raleigh, North Carolina and Salt Lake City, Utah.

This is the income and one-bedroom rent data in San Antonio:

$51,029 – median renter household income
$1,082 – one-bedroom monthly asking rent

A separate Apartments.com survey found 39 percent of U.S. adults would never feel comfortable living with a roommate, and 16 percent of renters would rather pay more in rent to live alone than consider living with a roommate.

"Factors contributing to lower rents may include recent high levels of construction, rising vacancy rates as renter demand catches up to supply, and fewer regulations, such as flexible zoning and lower development costs compared to other parts of the country," the report said. "Living alone has become a non-negotiable for many renters, and some renters are willing to make tradeoffs to afford this lifestyle."

The top 10 most affordable U.S. metros for living alone are:

No. 1 – Austin
No. 2 – Oklahoma City
No. 3 – Phoenix
No. 4 – Raleigh, North Carolina
No. 5 – Salt Lake City, Utah
No. 6 – San Antonio
No. 7 – Dallas-Fort Worth
No. 8 – Denver
No. 9 – Portland, Oregon
No. 10 – Columbus, Ohio

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