High mortgage rates and concerns about the broader economy have weighed on the housing market, dampening sales in recent months. Now the problem is having an impact on house prices and rents.
The average US home sale price fell for the first time in more than three years, according to a new report from Redfin, a real estate brokerage. The decline was just 0.1% year-on-year in the four weeks ending October 25, but after three years of steady growth.
While mortgage rates have pulled back somewhat in recent weeks, they are about a full percentage point higher than a year ago. Higher rates pushed the average homebuyer’s monthly payments to the second highest on record, according to Redfin.
Pending home sales, a measure of contracts signed on existing homes, have continued to decline in recent weeks. A separate report from the National Association of Realtors showed that sales in September hit the lowest level in 25 years.
New listings also fell, now at their lowest level since the start of the year, according to Redfin. This is because sellers are losing profits as supply increases and buyers withdraw. They can no longer command the prices they want.
With the sales market stuck, more renters stay, and eventually rents rise again. The national average rent rose 0.1% in October, according to the Apartment Register. That’s the first gain in over three years. While it is a small increase, it marks a turnaround after the oversupply of new units has fallen rent.
“The vacancy rate is also gradually tightening, as the market transitions out of the soft conditions it has experienced in recent years,” wrote Chris Salviati, chief economist at Apartment List in the report. “Our latest market indicators tracking concession rates continue to show signs of softening.”
The national multifamily vacancy rate was at 7% in October, remaining elevated compared to the long-term norm, but continuing to decline after peaking earlier this year.
Rents are rising even in Sun Belt markets, which have seen high vacancies for years, thanks to strong construction. Austin, Phoenix and Tampa are finally starting to recover, although Phoenix, along with Las Vegas and San Antonio are still seeing the steepest drops. The San Francisco Bay Area leads the country in rent growth, (+13.1% year over year), followed by San Jose, California.