Home Prices Just Fell Nationwide For The First Time In More Than Three Years, But Rents Rose Too And The Median Mortgage Payment Hit $2,786, Up 10.7% From Last Year

For three years, American home prices only seemed to know how to slow down, never to fall. Now they have finally dipped, and renters are the ones feeling a new squeeze. According to Newsweek, home-sale prices fell nationwide last month for the first time in more than three years, while rents rose for the first time in just as long.

A row of brick houses on a corner street with a for sale sign.

The median home-sale price was $389,601 in the four weeks ending October 25, down 0.1% from a year earlier, according to brokerage Redfin.

A “Hollow Victory” For Buyers

That drop is tiny, and it is not likely to tip the scales for buyers put off by high prices. Still, it marks a reversal for a market where price growth could slow but never seemed to stop.

Newsweek calls it a hollow victory for American buyers. Lower prices help affordability a little, and 21.5% of homes for sale in those four weeks had their asking price cut by sellers, up from 20.9% a year earlier.

But prices are falling for an unhappy reason: demand has dropped further after mortgage rates climbed back above 7% last month.

The Median Mortgage Payment Just Hit $2,786

The median mortgage payment was $2,786 in the week ending October 25. That is up 10.7% from a year earlier and the highest level in Redfin’s records, except for the week before, when rates averaged even higher.

As of October 29, the latest data from Freddie Mac, the 30-year fixed-rate mortgage averaged 7.24%, down from 7.32% the previous week and 6.17% a year earlier. Even with that small dip, the 30-year fixed, the most popular home loan, was still near a three-year high.

The report ties the climb to high inflation and the Federal Reserve’s efforts to hold off further increases in the cost of living.

Pending home sales, a clue to how the market will fare in coming months, fell 1.8% from a week earlier on October 25 to the lowest level in records dating back to 2021. For the third week in a row, pending sales declined in all 50 of the most populous U.S. metro areas, according to Redfin.

Seattle saw the biggest decline in pending sales, down 31.6% year over year in October. Atlanta followed at 25.9%, then San Diego at 25.3%, Las Vegas at 22.7% and Denver at 22.3%.

Higher Rates Are Keeping People In Place, And Rents Are Rising

When buying costs too much, people keep renting. Higher borrowing costs are forcing more Americans to stay put and delay buying. The effect is small so far, but it shows up in the data: the median rent nationwide rose 0.1% in October to $1,384, according to Apartment List.

It is the first nationwide increase in three years, after an oversupply of apartments pushed costs down. The national multifamily vacancy rate remains historically high at 7%, but it has been declining consistently since peaking earlier this year.

Even Sun Belt markets with the highest vacancy rates, thanks to a building boom, are seeing prices stabilize. In Austin, a former pandemic boomtown, rent declines have eased to 1.3% year over year, compared with a 6.2% drop last year. Declines were also smaller in Denver (2.4%), Phoenix (2.5%) and Tampa (2.2%).

“The National Market Is Tipping Into Buyers’ Territory”

Joel Berner, senior economist at Realtor.com, previously told Newsweek that buyers with “plenty of cash or home equity,” like those who bought before prices skyrocketed during the pandemic, may find good deals now. “Prices are falling, time on market is back to normal, and inventory continues to grow. The national market is tipping into buyers’ territory,” Berner said.

But buyers who rely on mortgages “are often struggling to find entry-level inventory that meets their needs and their budget,” he said. “With a growing cost of living, saving for a down payment becomes more difficult, so first-time buyers end up financing more of their purchase at higher rates.”

Some sellers, seeing the direction of the market, are pulling back. Redfin’s latest data shows new listings fell 0.6% from a week earlier in the week ending October 25, to their lowest level since the start of the year.

What To Do In A Market That Cannot Make Up Its Mind

Mixed signals call for steady habits. Here are practical ideas whichever side of the market you are on.

If you are buying, compare the monthly payment, not just the price. A small price cut can be wiped out by a higher rate, so run the numbers at several rates.
Ask for concessions. With a fifth of listings cutting asking prices, sellers may agree to repairs or help with closing costs.
If you are renting, check your lease renewal date now and compare nearby listings before you sign again.
If you are selling, price realistically from day one. Homes that start high often end up with a cut.
Whatever your plan, keep a cash cushion for repairs, because owning a home costs more than the mortgage.

A market that is neither booming nor collapsing rewards patient people with solid paperwork. That is good news for anyone who has been waiting for the frenzy to cool.

Willow and Hearth