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SALT LAKE CITY — This week marked another bleak milestone for the U.S. housing market — though analysts say the pain is necessary to correct more than two years of runaway price gains.
As the average 30-year fixed mortgage rate topped 7% by Freddie Mac standards, pending home sales also fell a dramatic 35% nationwide this month, the biggest drop in at least seven years.
That's according to a housing market update published Thursday by Redfin, which also reported six metro areas are now experiencing year-over-year price declines.
Home sales down
Pending home sales in the U.S. fell 35% year over year during a four-week period that ended Sunday. "That represents the largest annual decline and the fewest homes under contract in any October since at least 2015," Redfin reported.
Taylor Marr, Redfin deputy chief economist, said it marks a significant shift in the ever-cooling U.S. housing market.
"Until this month, the pullback in the housing market could be described as something of a return to pre-pandemic conditions before sub-3% mortgage rates ignited a home buying frenzy in 2020 and 2021," Marr said. "But now both mortgage purchase applications and pending sales are below 2018 levels."
He called it a "four-year setback" that's a "serious correction" — one that we've yet to see it bottom out.
"With mortgage rates still elevated, we are in for further sales declines," Marr said, "but those should eventually bring price relief to those who need to move this winter."
The median home sale price was $365,725 in October, still up 5% year over year, but down 7% from a record high of $392,250 in June, according to Redfin.
However, the correction is hitting some areas harder than others.
Cities where home prices fell year over year
Home sale prices fell year over year in six U.S. metro areas during the four-week period in October. They are:
- San Francisco, down 5% year over year.
- Lake County, Illinois, down 3% year over year.
- Oakland, California, down 2% year over year.
- San Jose, California, down less than 1%.
- Philadelphia, Pennsylvania, down less than 1%.
- Frederick, Maryland, down less than 1%.
Some of the largest year-over-year price declines in October were seen in metro areas in California, according to Redfin. It's no secret the West was ground zero for the pandemic housing frenzy and the fastest-rising home prices. Now, the West is also taking the hardest hit.
