U.S. home-sale prices increased 4.5 percent in October compared to a year ago, to a median of $297,200. October’s year-over-year price increase marks a return to an overall healthy level of price growth after posting a 6.5-year low level of growth in September. Home prices typically decline from September to October, having fallen by an average of 1 percent between the two months over the previous eight years. This October however, prices increased nationally 2.4 percent month over month. Despite this national increase, just 32 of the 71 largest metro areas Redfin tracks saw home prices increase from September to October, which suggests that the monthly gain is due to the share of homes selling last month shifting slightly to more expensive areas rather than individual homes increasing in value.
However, evidence that the market is cooling down can be seen in price drops. In October 31.3 percent of homes for sale had at least one price drop of more than 1 percent. This is the highest share of price drops on record since Redfin began tracking this metric in 2010, and 6.3 percentage points above last October’s level of 25 percent. In Seattle, almost half of homes for sale had price drops, with an average price cut of $27,500, down from more than $30,000 a year earlier.
The number of homes for sale was up 1.3 percent from a year earlier. This was the highest level of inventory growth since September 2015. National inventory growth continues to be driven by big increases in softening coastal markets like San Jose (110.9%), Seattle (73.2%), San Diego (38.2%), and Boston (17.3%).
The number of homes newly listed in October rose 5.4 percent year over year, but the number of completed home sales continued to sink, dropping 5.7 percent from 2017. Home sales declined in 59 of the 71 largest metro areas that Redfin tracks.
Metro areas like Seattle, San Diego and San Jose, where high home prices mean that rising mortgage rates have the largest effect on affordability, are seeing the biggest increases in inventory coupled with decreasing sales. As of last week, the average interest rate for a 30-year fixed-rate mortgage had increased to a seven-year high of 4.94 percent. The biggest sales declines were in some of the most expensive metros, including Seattle (-19.6%), San Diego (-15.7%), and Honolulu (-22.9%).
“An increase in interest rates effectively makes home-buying more expensive because buyers have to pay higher monthly mortgage payments even if the sticker price hasn’t changed,” said Redfin chief economist Daryl Fairweather. “Some homebuyers are adjusting their price range down, and others are backing out of home-buying entirely–deciding that renting is a better deal. Sellers are now realizing buyer demand isn’t what it used to be and are dropping their prices. When buyers and sellers are on the same page, the market moves quickly, but since sellers were slow to react, we’ve seen a slowdown in the housing market.”
Across Redfin metros, the typical home that sold in October went under contract in a median of 43 days, two days faster than last year. This October, 20.3 percent of homes sold above the list price, down from 22.9 percent last October. The share of homes that went under contract within two weeks also fell, from 23.6 percent last October to 21.3 percent this October.
“Another factor we’re watching closely as we examine national housing market trends going into the end of the year is the devastation of the California wildfires,” Fairweather continued. “While the fires are disrupting many Californians lives and therefore any immediate home-buying plans, we’re already hearing from Redfin agents in Southern California that they expect homeowners and homebuyers to be resilient as they have in the face of past natural disasters, with renewed commitment to rebuilding and picking up where they left off with a home search. The fact is that rising mortgage rates and high home prices have a bigger long-term effect on the local housing market than the fires’ destruction.”
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Redfin Estimate
Below are market-by-market breakdowns for prices, inventory, new listings and sales for markets with populations of 750 thousand or more. For downloadable data on all of the markets Redfin tracks, visit the Redfin Data Center.
EDITOR’S NOTE: The Washington, D.C. and Baltimore metro areas were excluded from this report and analysis due to data accuracy issues. The issues stem from problems with the listings information that Redfin receives from the MLS. Redfin engineers are working with the MLS to resolve the issue, which does not impact the ability to view homes for sale in the Washington and Baltimore metro areas on Redfin.com.
