The Redfin Housing Demand Index decreased 5 percent in July, falling to 108 from 113 in June, the fourth consecutive month-over-month decline. Redfin real estate agents report that the market is rapidly cooling, with buyers reaching their limit on prices and showing less interest in hot home listings. So why does the market feel like it’s cooling so much when the numbers are still pretty strong for September?
It’s because the market was so hot this spring—the Demand Index reached 124 in March and April—so we’re feeling a fast fall from a high point. However, even though the tumble makes the market feel soft, the Demand Index is still nine points higher than July of last year.
Using Redfin demand data through mid-July and housing metrics from 15 major metro areas, Redfin forecasted July home prices and sales on July 23, the industry’s earliest forecast of U.S. home values and sales.
In July, the median sale price increased 4.6 percent from a year earlier, very close to our July 23 forecast of 4.3 percent growth. The Redfin sales forecast for July was also on target, with sales up 14 percent year-over-year against our forecast of 14.3 percent.
For August, we forecast prices to rise 2.2 percent and sales to increase 4.6 percent compared to this time last year. In September, we expect prices to increase 5.3 percent from last year and sales to rise by 10 percent. Based on home price data from the first 24 days of August and how strong September prices are looking, price growth of only 2.2 percent in August seems low. We now expect the actual number to be a point or two higher.
Prices and sales in 2015 have outperformed 2014 levels every month.
When compared to September 2014 the housing market looks strong. Even though the Demand Index has fallen every month for four straight months, buyer interest in July was still higher than last year. Additionally, newly listed homes for sale increased 7.6 percent year-over-year, which buoyed our September sales forecast.
However, we mentioned that demand is falling from its spring high very quickly, and we think this will continue into the fall months.
In Denver, where half of new listings sell in six days or less, Redfin agents and their customers are seeing the slowdown first hand.
“It feels like the market is at a standstill,” Redfin agent Michelle Ackerman said. “Showings have dropped off significantly.” Ackerman recently put a home on the market for less than $300,000 in one of the city’s top-rated school districts. She expected 30 showings in the first weekend and three offers. She got nine showings and one offer.
“The market is changing week by week, and today’s buyers are more likely to walk away from a home they feel is overpriced than last month’s buyers were,” Ackerman said. “Sellers now have to negotiate with buyers to make a sale happen.”
The price model includes:
The sales model includes:
The Redfin Demand Dashboard provides an at-a-glance comparison of 10 demand-related metrics. The Demand Dashboard tracks the same 15 markets as the Redfin Demand Index.
