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Redfin (NASDAQ:RDFN) reported a further pullback in homebuying demand Thursday as mortgage rates reach their highest level in 13 years.
The real estate brokerage, which recently announced layoffs due to home sales falling, said home tours, offers, and other requests for agents’ help, as measured by its Redfin Homebuyer Demand Index, posted their most significant annual decline in over two years as mortgage rates approach 6%.
According to Redfin data, the monthly mortgage payment on the median asking price home grew to $2,500 at the current 5.81% mortgage rate. That is a 48% increase from $1,693 a year earlier when mortgage rates were 3.02%
“Sellers are not holding out. The weekly share of listings with a price drop reached a new high during the four weeks ending June 19,” Redfin stated in its report.
The company’s chief economist, Daryl Fairweather, said mortgage rates have put a “big chill on demand for homes.”
“With home prices still at record highs, the affordability crisis has been dialed up to an 11 out of 10. Home sellers are aware of this as well; a record share are dropping their asking price. Even though there are fewer home sales, prices have not declined any significant amount yet. But if the housing market continues to cool, prices could fall in 2023,” added Fairweather.
The report points to a decline in Google searches for “homes for sale,” which during the week ending June 18 were down 14% from a year earlier. Meanwhile, touring activity as of June 19 was 6% below the start of 2022 compared to a 24% rise during the same period last year.
“Many home sellers have it stuck in their head that homes are selling a certain amount above asking, or that they can under-price their home to try to generate a bidding war, but that strategy isn’t working anymore,” said Robin Spangenberg, a Boston Redfin real estate agent. “High mortgage rates have kicked a lot of buyers right out of the market.”
Redfin shares jumped 8.8% Thursday.
