Buyers are pulling the U.S. real estate market in opposite directions, as some fiercely compete amid a housing shortage, while others pull back out of concern of rising mortgage rates, according to a report Thursday by real estate site Redfin.com.
Intense bidding wars over a limited number of available homes pushed the number of sales above their initial asking prices to 27.6%, the highest number Redfin has recorded since it began tracking the statistic in 2010. But price discounts are also at record levels as sellers adjusted their expectations this spring as interest rates rise.
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"The record percentage of homes sold above list price is at odds with the higher percentage of price drops in May," Redfin senior economist Taylor Marr said in the report. While most areas are still very much a seller’s market, he added, "rising mortgage rates may be pushing buyers to the limit of what they’re able to pay."
The contradiction signals a market out of balance, as does the general lack of inventory. At the end of May, there was about 2.5 months’ worth of inventory available compared to six months of supply in a stable market, Redfin said in its report.
In some ways, the increase in mortgage rates has created a welcome change, as it pumps the brakes on soaring home values.
"Prices are still increasing, but not at the same rate we saw earlier in the spring," Mr. Marr said. The country’s median sale price rose 6.3% in the year to May but only 1.4% monthly, a slowdown from prior months.
New homes for sale even increased 4.3% nationwide compared to May of last year, with places like Washington, D.C., Portland, Oregon, and Seattle, seeing consistent boosts to inventory.
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Years of inventory declines won’t be reversed overnight, but the recent growth in new listings is positive, said Jessie Culbert, a Redfin agent in Seattle, in the report.
"We can already feel a slight easing in the market," Ms. Culbert said. "Homes are still selling quickly and often over-asking, but where last May a seller may have gotten 15 to 20 offers, this May it was two to five."