In September, home prices posted the smallest increase in six years, according to the latest data collected from Redfin.
According to the report, in September the median home-sale price was $292,000 across the 171 metros, which is the slightest increase since February 2012 when it was $168,000.
Redfin reports home sales decreased in 50 of the 71 largest metro areas that Redfin tracks. Notably, in metros where high home prices have strained buyers financial capabilities, mortgage rates are weakening demand.
"Rising mortgage rates, paired with already high home prices, are giving pause to homebuyers in expensive West Coast markets," Redfin Chief Economist Daryl Fairweather said. "Some of these places are finally seeing the number of homes for sale surge after years of a supply drought."
Fairweather explained that last month's low level of price growth was attributed to double-digit declines in home sales in Seattle, Los Angeles and San Jose.
According to the report, in San Jose, the typical home that sold in September spent 26 median days on the market, which is 12 days longer than 2017 average. In Seattle, the typical home is spending 17 median days on market.
The report indicates inland metros with relatively affordable homes, including Pittsburgh and Grand Rapids, Michigan, put downward pressure on the national median sale price. This was because they contributed a greater share of sales to the nationwide total than they did in 2017.
"Last year and earlier this year, Seattle, San Jose and Denver were the hottest markets with homes selling in days, not weeks,” Fairweather said. “These metros have now been replaced by Grand Rapids, Omaha, Nebraska, and Indianapolis as the fastest markets in the country."
Homes in Grand Rapids are now going under contract in 13 days, picking up from 15 days last year. In Indianapolis, which is now tied with Boston as the third fastest market, homes are only on the market for a median of 16 days, decreasing from 40 days last year.
According to Redfin, as more and more homebuyers find themselves priced out in expensive markets like Seattle and Los Angeles, they are increasingly looking to the Midwest and South for affordable homes and lower cost of living.
"This acceleration in Midwest metros is due to increasing demand, as new residents move inland in search of affordability, without an increase in homes available for sale," Fairweather said.
The report highlights that for the first time in nearly three years, the number of homes for sale slightly increased, up 0.2% from 2017. The national inventory growth was led by spikes in “softening” coastal markets.
In these markets, San Jose surged 82.7%, Seattle climbed 54.5%, San Diego rose 30.7% and Boston increased 9.1%.
"The number of homes newly listed in September rose 3.6% year over year, but buyers seemed reluctant to make offers and purchase that new inventory, as September sales fell 4.8% year over year," Fairweather said.
Fairweather said that buyers are now being more careful with their decisions.
“With home prices growing slowly, buyers want to be absolutely sure that the home they buy is a home they will stay in for years to come."
This September, 21.7% of homes sold above the list price, falling from 23.8% in 2018. Furthermore, the share of homes that went under contract within two weeks fell to 23.1%, sliding from 24.1% last year.
In fact, 136 out of the 171 metros experienced price growth greater than the national median of 2.1%, and half of the metros experienced price growth at or above 6%, according to the report.
Last week, Freddie Mac revealed the average interest rate for a 30-year fixed-rate mortgage had risen near 5% for the first time since 2011.