Mortgage rates are shooting up at the fastest pace in history, sending the typical monthly mortgage payment for a homebuyer up more than $500 since the beginning of this year. As rates quickly approach 5%, we expect their impact on homebuyer demand to change from a motivator—driving a sense of urgency to buy before rates rise further—to a deterrent—causing buyers to step back as the cost of homebuying exceeds their budgets. There are a number of early signs that this shift is beginning to take place.
Fewer people are starting online home searches and applying for mortgages than this time last year, and year-to-date growth in home tours remains far below 2021 levels. An increasing share of sellers are also reducing their prices after putting their homes on the market. The share of homes that sell quickly (within 14 days) continues to grow, but at a slower pace than earlier this year.
Still, the market still feels very hot, with homes selling faster and for more money than ever before. That’s largely because supply remains near record lows, with fewer homeowners putting their homes on the market.
“Homebuyers may not feel like the market has gotten any easier. That’s because they’re often competing against investors, all-cash buyers and migrants from expensive cities who aren’t as sensitive to mortgage rates,” said Redfin Chief Economist Daryl Fairweather. “But there are early indicators that the market is turning, and we expect the softening to become more apparent in the coming weeks, eventually causing home-price growth to slow. We’ll be watching closely to see whether the market slows from 100 miles per hour to 90 or 100 miles per hour to 75.”
As of this month, Redfin has started receiving fewer requests than a year ago for agents’ service in pricey coastal markets including Seattle, San Diego, Boston and Washington, D.C. These markets are experiencing year-over-year declines in pending sales, though they’re still seeing homes sell relatively quickly and are not yet seeing outsized growth in the share of sellers cutting their list prices. Declines in searches, touring, and mortgage applications are larger in California than elsewhere.
“I’m starting to see early signs that the housing market is letting off some steam—something I wouldn’t have said a month ago,” said Aaron McCarty, a Redfin real estate agent in the Bay Area. “Bidding wars are still common, but homes that would have brought in 10 or more offers earlier this year are now getting half that many. Homes also aren’t selling as astronomically over the asking price as before. A house that might’ve gone for $700,000 over the list price two months ago may now go for $300,000 or $400,000 over. That’s not the case every time, but I’m finding more opportunities for my clients where the competition is a bit more manageable.”
Redfin agents say they’re starting to see some sellers put their homes up for sale earlier than planned because they’re worried they’ll miss out on the market’s peak if they wait.
“The rise in mortgage rates is top of mind for sellers, too,” said Justin Hess, a Denver Redfin real estate agent who focuses on listings. “If you’ve been considering putting your home on the market, now’s the time. There are still plenty of buyers and mortgage rates are only going to keep climbing, making it more expensive to find your next home.”
Unless otherwise noted, the data below covers the four-week period ending March 27. Redfin’s housing market data goes back through 2015.
Refer to our metrics definition page for explanations of all the metrics used in this report.
