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New U.S. home listings posted their largest M/M increase in September since February 2022, real estate brokerage Redfin (NASDAQ:RDFN) said on Monday, though its data also showed that the number of buyers backing out of contracts due to rising mortgage rates hit their highest level in almost a year.
The 1.4% M/M rise in new listings comes as a relief for U.S. homebuyers, who have been facing a market extremely tight on supply amid soaring home prices and elevated mortgage rates.
“A lot of Americans are sitting on piles of money in their homes, and some are opting to cash out even if it means giving up their low mortgage rate; they’re worried there’s a possibility home prices will fall if rates remain elevated. We expect rates to remain high for the foreseeable future,” Daryl Fairweather, Redfin (RDFN) chief economist, said in a statement.
“But we also expect prices to stay high into next year. Housing supply is so strained that even a small uptick in listings lures buyers off the sidelines, bolstering sales,” Fairweather added.
The RDFN report also pointed out that though new listings rose on a M/M basis in September, on a Y/Y basis they fell 8.9% and remained far below pre-pandemic levels. That decline came due to mortgage rates hitting their highest level in more than twenty years, with the average 30-year fixed-rate mortgage scaling 8.0% only last week.
With more listings hitting the market in September, pending home sales – or the number of homes going under contract – rose 1.3% M/M. However, closed sales declined to their lowest level since the onset of the pandemic, dropping 1.5% M/M.
The rise in pending sales but fall in closed sales was partly due to ~53K U.S. home-purchase agreements being cancelled in September, equivalent to 16.3% of homes that went under contract that month – the highest percentage since October 2022, when mortgage rates surpassed 7% for the first time in two decades.
“Buyers are extra cautious right now. They want to make sure they’re getting a good deal given how much mortgage payments have gone up, and when they don’t feel like they’re getting a good deal, they’re backing out,” Heather Kruayai, a Redfin (RDFN) agent in Jacksonville, Fla., said in Monday’s statement. Jacksonville saw the second highest rate of deal cancellations among the major metros RDFN analyzed.
Additionally, according to the RDFN data, the median U.S. home sale price rose 1.9% Y/Y to $412,081 in September, and fell 2% from a month earlier – typical for this time of the year.
The S&P 500 Real Estate sector fell 0.8% to end at 203.59 points on Monday, while its accompanying Real Estate Select Sector SPDR ETF (XLRE) slipped 0.9%.
Redfin (RDFN) stock closed +0.6%, while peers Anywhere Real Estate (HOUS) closed -3.8%, RE/MAX (RMAX) +1.6%, The Real Brokerage (REAX) -0.7% and Compass (COMP) +1.5%.
