Homebuyer demand, an early indicator of housingmarket performance, was up 13% year over year in June, the smallest increase since January, according to Redfin’s new housing demand index, which debuted Thursday at a level of 113.
Redfin’s new housing demand index measures housing activity prior to purchases. The index is based on millions of visits to Redfin.com home-listing pages, and thousands of Redfin customers requesting home tours and writing offers in 15 major metro areas.
Redfin uses its demand data through mid-July and industry housing data from 15 major metro areas to forecast changes in year over year home prices and sales in the current month and one month ahead.
The demand index is scaled to equal 100 on January 2013, which is the first month of the estimation period.
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Although the demand index followed a similar seasonal pattern to previous years in 2015, increasing from January to April, then beginning to decline, this year’s 6.7% decline from May to June is steeper than the 3.9% decrease for the same period in 2014.
“This year’s seasonal slowdown is more extreme than normal due to buyer fatigue over high prices and low selection, combined with gradually increasing mortgage interest rates. Buyers are still in the market, but they’re setting boundaries on what they’re willing to pay,” the Redfin report said.
Year over year, Redfin forecast home prices will be up about 4.3% in July, and just 2.2% in August.
The number of homes sold in July is expected to grow by 14.3% year over year, and by 4.6% in August.
Two major factors driving the forecasts are fewer people making offers and lower list prices for homes going under contract.
“Homebuyers are still touring in force, but they’re more price sensitive,” said Nela Richardson, Redfin chief economist. “Fewer are making offers, and when they do, they’re buying less expensive homes. The median list price of pending homes fell by $10,000 to $300,000 in just the last two weeks.”