Homebuyers have not had the seasonal housing market slowdown they hoped for after a blazing hot spring and summer.
Homes sold faster and for more money in October than they did in September due to sustained homebuyer demand and razor-thin inventory, according to data from Redfin, a national real estate brokerage.
Forty-five percent of homes were under contract within two weeks of listing and the median sale price of all Redfin metros ticked upward to $357,000 after declining each month since July.
In typical years, these metrics decline steadily until the end of the year before the market becomes more active the following spring.
Due to the pandemic, 2020 and 2021 have been anything but typical years for the housing market. In 2020, spring shutdowns pushed peak homebuying season later into the summer and fall and in 2021 homebuying surged as a result of low interest rates and pent-up pandemic demand.
That demand continued throughout October despite rising interest rates. One theory from Redfin Chief Economist Daryl Fairweather is that homebuyers sidelined by the historically busy spring market are finding opportunity during the slightly less busy fall.
Fairweather said this trend will continue until mortgage rates “rise substantially.” However, major housing authorities are forecasting a gentle rise throughout 2022. Kiplinger, with one of the highest forecasts, puts the 30-year rate at 3.8% by the end of 2022.
There’s also the issue of inventory, which is both driving and suffering from increased demand. The number of active listings in October 2021 was down 21% from last year and 40% from 2019.
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The number of new listings continued to fall in October and are down 6% from last year and despite some progress on finding materials and labor, home builders are facing a shortage in lots to build on.
The market had just 8.1 weeks supply of inventory in October, only a slight improvement from the 2021 low of 7 weeks in June. A six months supply of inventory is considered balanced.
While 2021 continues to blaze a trail as the hottest housing market on record, there are signs that things are getting easier for homebuyers. Bidding wars are subsiding and bringing sales prices with it.
Sale-price-to-list-price ratio measures how much homebuyers paid above asking price. Homebuyers paid just 0.6% above asking price in October, down from more than 2% in June.
The share of homes that sold above list price fell to 44.7% in October, down from nearly 60% in July and August.
Finally, price drops continue to rise and are above 2019 and 2020 levels. This measures the share of homes for sale that reduced price before selling. In October, 4.9% of homes for sale had a price drop, up from under 2% at the beginning of the year.
While the 2021 housing market remains hot, the power dynamic between buyers and sellers is slowly starting to balance out. Buyers that waited out the busy summer season are finding less competition and paying less above list price. If seasonal patterns hold up, this trend is likely to continue until the end of the year.