Housing demand shows signs of slowing

House for sale sign

The latest data from an online brokerage site shows what could be the first cracks in the housing recovery. The Redfin Housing Demand Index fell 4.9 percent to 118 in April, the fifth consecutive month of year-over-year declines. There was a 6.7% drop in the number of customers writing offers.

Interest in housing, however, continued to be strong. The number of Redfin users requesting property tours rose 19.8% over 2015, and was nearly 18% stronger than in March.

Though housing statistics are usually measured in signed and closed contracts, the Redfin index measures homebuyer activity prior to purchase. It is based on millions of visits to Redfin.com home-listing pages and thousands of Redfin customers requesting tours and writing offers in 15 major metro areas.

Across the 15 metro areas, home prices were up 5% in April, with sales up a modest 1.3%.

housing demand graph

Market distortion?

What isn’t clear is how a tight inventory of homes may be distorting the housing market. April marked 12 months of consistently falling inventory as the total number of homes for sale fell 2.2%. New listings were essentially flat, down 0.3% from last year.

Even though there were fewer offers coming in, the depletion of homes for sale continues to make it a competitive market for buyers.

“Timing is everything in today’s market,” said Redfin chief economist Nela Richardson. “Even though it’s a seller’s market, a lot of sellers are also buyers who are risk averse as they confront an inventory drought while finding their next home. As sellers, they’re often taking the sure bet over the highest offer, whether it’s all cash or a lender guaranteeing a quick close. Only people with time wrangle up the price.”

In April, 63% of Redfin agents writing offers faced competing bids, the same as last year. And 29.6% of homes sold for more than their asking price, the highest level recorded since August 2013.

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