Challenged by a slew of economic and political uncertainties, homebuyers across the U.S. decided to delay their house hunting in November, according to a report released Tuesday.
The Housing Demand Index, compiled monthly by the Seattle-based national brokerage firm Redfin, fell to 94, a 7.3% decline from October.
October’s reading of 100 matched a three-year average. The Index ranged between 85 and 120 during the past three years.
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By analyzing thousands of customers’ activities across 15 metro areas, Redfin found that 7.6% fewer homebuyers went on tours of homes compared to the previous month, while 8% fewer homebuyers made offers. Both figures were seasonally adjusted.
The shrinking demand was partly caused by a shortage of supply. There were 10.2% fewer homes on the market in November compared with the same period last year, according to Redfin.
A few other events in November also made homebuyers adopt a wait-and-see attitude.
"Buyers and sellers had a lot to digest in November, including an election, higher home prices and an increase in 30-year mortgage rates that rose from 3.5% at the beginning of the month to 4% at the end," Nela Richardson, chief economist at Redfin, said in the report.
Market trends in major California metro areas were noteworthy. In the Los Angeles area, the Demand Index declined 18% from October to 83 in November, with 12.8% fewer customers touring homes and 25.5% fewer customers writing offers, according to Redfin.
Although the presidential election and rising interest rates deterred some buyers, the real kicker was the prices. "Prices here (L.A. area) are at or, in some instances, above 2007 peak levels, so you have a lot of buyers concerned about a potential bubble. These folks are taking more a wait-and-see approach, rather than jumping in," said Alec Traub, an agent with Redfin.
On the other hand, the Northern California city of Oakland saw a significant increase in house demand in November. Compared with October, there were 12.5% more customers requesting tours and 62.7% more customers making offers. Its Demand Index in November reached 125, up from October’s 99.
Because of its relative affordability, Oakland drew more interest from potential buyers who used to rent in nearby San Francisco. The median sale price in Oakland was $635,000 compared with a level of $1.1 million in nearby San Francisco. "These buyers found significant competition and very high prices in San Francisco, so they switched their focus to the East Bay, causing Oakland’s market demand to continue to increase," Redfin real estate agent Noah Manning said in the report.
Home demand in San Francisco fell 10.8%, dropping its index to 90 in November.
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Separately, Redfin found that the demand for luxury homes across the U.S. was even more sluggish compared with the overall market. Redfin’s luxury data looks at city-level data in more than 1,000 cities across the country.
Redfin defines a home as luxury if it is among the top 5% most expensive homes sold in the city in each quarter.
In the third quarter of 2016, price growth in the high-end segment has slowed for seven consecutive quarters, compared to the bottom 95% of the market.
"Demand for luxury homes has lagged [behind] the rest of the market all year, and this is a trend we expect to continue in 2017 as demand continues to shift from well-heeled investors to first-time buyers in search of starter homes," Ms. Richardson told Mansion Global in an interview at the end of last month.
Write to Fang Block at fang.block@dowjones.com