- Redfin CEO Glenn Kelman said homes for sale are getting price cuts twice as often as last year.
- Certain pandemic hotspot markets, such as Denver and Boise, have seen the most price cuts.
- Pending home sales fell 9% from May to June 2022 when economists predicted a 1% decline, he said.
Housing markets in pandemic hotspots like Boise and Denver have reached frenzy in 2021, with price spikes and bidding wars pushing those high prices even higher. But as demand for housing in these locations falters, it may be cooling off just as quickly.
Redfin CEO Glenn Kelman said on a conference call to discuss the company’s second-quarter earnings on Thursday that price cuts in Boise and Denver were up more than 50% in June from a year earlier.
Kelman also said 18% of all homes on the market nationwide have seen price cuts, double the 9% last year.
Pending sales, another key sign of market activity, also fell. Kellman said he fell 20% between June 2021 and June 2022.
“Between May 2022 and June 2022, economists were expecting a 1% drop, but a whopping 9%,” Kelman said. “Existing home sales could put him below 5 million on an annualized basis. “Mendoza Line” For homes that have not been invaded for a full year since 2014. ”
These data points mean it’s getting easier for everyday people to acquire a home in these locations – finally. The drop in prices means it’s getting harder to sell homes at prices that were only a few months old.
This means that not only is buying a home cheaper, but there is less competition.
However, not all homes are created equal. Kellman says that “beautiful homes on corner lots” will be harder to come by because they are still in demand. He added that it might be much easier to get in.
High mortgage rates curb demand
This drop in demand can be largely attributed to higher mortgage rates as the Federal Reserve tries to keep inflation under control by raising interest rates.
“The breaking point for many buyers came on Friday, June 10,” Kelman said, when mortgage rates started to rise above what they have been since 1987.
In the three business days between that day and the following Tuesday, interest rates increased by 0.73%. increased by more than 6% For 30-year mortgages, that’s the highest score in 2022. It has declined since then. As of August 4, the interest rate for a 30-year mortgage is was less than 5%There has been no decline since the beginning of April.
High mortgage rates in the second quarter, combined with the continued rise in home prices, are deterring many people from even looking for a home.
Demand for housing is generally lower than it was a year ago, but certain hotspots such as Denver have seen a particularly sharp slowdown. Last month, the Colorado capital was one of the top 10 places with the highest percentage of locals looking for a home outside the city. According to Redfin dataMeanwhile, Boise Rated It was named one of America’s most overrated cities in June by Florida Atlantic University and Florida International University.
Economists predicted that house prices would actually come down a bit In popular places for people to move during the pandemic. people in these places Considering moving to a cheaper city Nearby Redfin data indicates that these locations may be becoming too unaffordable to sustain this growth.
Falling demand for housing slashed Redfin’s profits
A cooling housing market also took a toll on Redfin’s earnings.
As a result of the market slowdown, these market headwinds have resulted in the company missing earnings estimates by $6 million to $43 million, Kelman told investors and analysts by phone.
Redfin’s earnings report comes after a tumultuous few months for the company.
Redfin laid off as mortgage rates rise and housing market slows dramatically About 8% of staffor cut about 470 workers in June to cut costs and boost earnings.