Mike Imgarten witnessed a frenzy of demand and a dearth of inventory during a two-month house hunt in Sacramento, California. Fearing he would pay too much after a surge in prices, he said he took a break from searching in June.
Sales in Sacramento now are off by more than 25 percent from a year ago and, while inventory remains tight, the supply of homes on the market has almost doubled, according to Erin Stumpf, Imgarten’s real estate agent.
“Several homes I drive by on my way to work have had for- sale signs up for a couple months, while before, they’d be gone within a week,” said Imgarten, a 29-year-old civil engineer.
In states such as California, Arizona and Nevada, where bidding wars have fueled the country’s largest gains in home prices, booming markets are showing signs of cooling as buyers like Imgarten step back. The surge in values, combined with higher mortgage rates, is reducing affordability while also encouraging more sellers to list their properties, indicating that price growth will slow after the biggest increases since 2006.
Asking prices in September were lowered on about 25 percent of listings, the biggest share in two years, while last month they were cut on 23.8 percent, according to Seattle-based brokerage Redfin, which tracks 22 cities across the country. The inventory of unsold U.S. homes climbed in September from a year earlier for the first time since 2011, while contracts to buy previously owned residences plunged the most in three years, data from the National Association of Realtors show.
Shifting Frenzy
“We are shifting from a frenzy to where buyers are taking a step back and being more analytical and unwilling to just make rash decisions,” said Ellen Haberle, an economist for Redfin.
While the pullback coincides with the time of year when sales typically slow across the country, the dropoff in heated areas such as Phoenix is far greater than expected, Michael Orr, director of the Center for Real Estate Theory and Practice at Arizona State University, said in a telephone interview.
A jump in borrowing costs since May has held back some buyers, while the government shutdown may have weakened confidence, Orr said. The average rate for a 30-year fixed loan was 4.16 percent last week, compared with 3.35 percent in May, according to Freddie Mac.
“We have buyers, but they’re on strike,” Orr said. “This caught everybody by surprise, including me. The suddenness has made a lot of Realtors uneasy.”