Redfin Corp. shares sank to their lowest level on record Wednesday, after the residential real-estate brokerage reported a sharp drop in September home sales and listings that suggests a housing-market “standstill” in which prices budged only slightly even as higher mortgage rates crimp demand.
The number of homes sold last month fell 25% year-over-year, and new listings fell 22%, Redfin
disclosed. Those were the biggest decreases on record with the exception of the early months of the pandemic, Redfin said.
“The U.S. housing market is at another standstill, but the driving forces are completely different from those that triggered the standstill at the start of the pandemic,” Redfin economics research lead Chen Zhao said in a statement.
Decreasing sales and listings would suggest a decline in demand and therefore prices, but that was not the case. Median home-sale prices slipped 0.5% month-over-month in September, but they were still up 8% year-over-year at $403,797.
“This time, demand is slumping due to surging mortgage rates, but prices are being propped up by inflation and a drop in the number of people putting their homes up for sale,” Zhao said. “Many Americans are staying put because they already relocated and scored a rock-bottom mortgage rate during the pandemic, so they have little incentive to move today.”
For more: When will house prices drop? These economists say prepare for a ‘prolonged slowdown’
Redfin said roughly 60,000 deals were called off last month, or around 17% of homes that went under contract during the month. That’s the highest share on record aside from March 2020, the company said.
Shares of Redfin dropped 8.8% in Wednesday trading to a low of $3.98 — the lowest intraday price on record since the stock began trading in 2017.
Zhao said the Federal Reserve would likely continue raising interest rates to fight persistent inflation — potentially making affordability questionable for many prospective buyers. Higher mortgage rates might not start falling until early to mid-2023, she said.
Read also: Adjustable-rate mortgage applications rise to highest level since March 2008 — as overall applications fall. So what’s going on?
While the pandemic initially brought housing demand to a halt, home-buying demand later boomed as people sought to relocate from cities or upgrade their homes. More recently, however, demand has slipped as mortgage rates rose. Home builders also face supply-chain backups for parts and materials and rising labor costs.
Redfin stock is down around 90% so far this year. By comparison, the S&P 500 index
is down 23% over that time.