Home Prices Slip as Mortgage Costs Pinch, While Rents Edge Higher

Home prices inch down, but affordability is still strained

After more than three years without a national decline, U.S. home-sale prices finally slipped. Across the four weeks ending October 25, the median sale price came in at $389,601, a 0.1 percent decrease from the same period a year earlier. It is a tiny move, unlikely to change the math much for buyers worn out by high costs, but it does mark a clear turn for a market that had only cooled, not reversed.

That softness shows up in pricing behavior. Redfin notes sellers trimmed asking prices on 21.5 percent of listings in the latest four-week window, a slightly higher share than a year ago.

Demand cools as rates and payments bite

Mortgage costs are doing the heavy lifting here. Rates pushed back above 7 percent last month, pressuring demand. Freddie Mac reported that as of October 29 the 30-year fixed stood at 7.24 percent, a slip from 7.32 percent the week before and above 6.17 percent a year ago. Even with that small weekly dip, the most common home loan sits near a three-year high, elevated by stubborn inflation and the Federal Reserve's rate hikes meant to tamp it down.

The payment picture tells the same story. According to Redfin, the median mortgage payment reached $2,786 for the week ending October 25, 10.7 percent higher than a year earlier and the highest on record apart from the prior week. Pending home sales fell 1.8 percent week over week on October 25 to the lowest since Redfin's series began in 2021, and for a third straight week they declined across each of the 50 biggest U.S. metros.

Supply is thinning too. During the week that ended October 25, new listings fell 0.6 percent from the prior week, touching the lowest level seen since the start of the year. With many buyers priced out by financing costs, "competition from other sellers is increasing," said Realtor.com senior economist Joel Berner. Some owners are stepping back, but for now sellers still outnumber buyers by the thousands.

Experts describe the market as in "hibernation" since early this year, and conditions could deteriorate further in the weeks that follow Election Day.

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Where metros are moving the most

Redfin's biggest year-over-year price drops last month were led by Seattle at -5.1 percent, followed by San Jose at -4.9 percent, Austin at -4.6 percent, Kansas City at -4.3 percent, and Nashville at -3.3 percent.

On activity, Seattle posted the steepest drop in pending sales in October at -31.6 percent versus a year earlier. Next were Atlanta at -25.9 percent, San Diego at -25.3 percent, Las Vegas at -22.7 percent, and Denver at -22.3 percent.

Rents turn higher as vacancies ease

The rental market is starting to firm up. Apartment List says the national median rent in October ticked up 0.1 percent to $1,384, the first monthly increase at the national level in three years.

Even the Sun Belt, where a construction surge left plenty of empty units, is seeing the shift. In Austin, rents were down 1.3 percent year over year last month, a much smaller decline when stacked against the 6.2 percent drop the metro saw a year earlier. The year-over-year pullbacks have also narrowed in Denver at -2.4 percent, Phoenix at -2.5 percent, and Tampa at -2.2 percent.

The metros with the largest year-over-year rent gains last month were San Francisco at +24.3 percent; Oakland at +16.5 percent; Boise at +12 percent; Virginia Beach at +8.5 percent; San Jose at +7.9 percent; Norfolk at +7.9 percent; Reno at +7.4 percent; Fremont at +7.1 percent; Bakersfield at +5.3 percent; and Chesapeake at +5.3 percent. The steepest year-over-year drops were in Madison at -3.7 percent, San Antonio at -3.5 percent, Garland at -3.4 percent, Las Vegas at -3.1 percent, Arlington at -2.8 percent, Phoenix at -2.5 percent, Mesa at -2.4 percent, Denver at -2.4 percent, Plano at -2.3 percent, and Tampa at -2.2 percent.

Why does that matter? As higher borrowing costs keep would-be buyers on the sidelines, more households remain renters, which can support rent growth even with vacancies still high by historical standards.

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