U.S. housing market prices edge down as rents turn higher

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Highlights

U.S. median home sale price fell 0.1% year-over-year for the four weeks ending Oct. 25, marking the first annual decline in over three years, according to Redfin.
Pending home sales in September dropped to their lowest level in 25 years, while new listings hit their lowest point since early this year.
Median rent nationwide rose 0.1% in October, the first increase in more than three years, as multifamily vacancy rates gradually tightened to 7%.

Housing slowdown reshapes pricing trends

As reported by CNBC, citing Redfin, the median U.S. home sale price falls 0.1% from a year earlier in the four weeks ending Oct. 25, the first annual decline in more than three years after a long stretch of gains.

High mortgage rates and broader economic concerns continue to weigh on the market, freezing sales activity in recent months. Although mortgage rates have eased somewhat in recent weeks, they remain about a full percentage point above year-ago levels, leaving the typical buyer's monthly payment at the second-highest level on record, Redfin says.

Pending home sales, which track signed contracts on existing homes, continue to decline in recent weeks. A separate report from the National Association of Realtors shows those sales in September falling to their lowest level in 25 years.

New listings are also dropping and now sit at their lowest level since the start of the year, according to Redfin. As supply rises and buyers pull back, sellers are losing pricing power and can no longer command the prices they want.

Rental market firms as tenants stay put

With the for-sale market stalled, more renters are remaining in place, helping rents rise again after a long period of weakness. Apartment List says median rent nationwide increases 0.1% in October, the first gain in more than three years, signaling a reversal after an oversupply of newly built units had pushed rents lower.

Chris Salviati, chief economist at Apartment List, says the vacancy rate is gradually tightening as the market moves out of the soft conditions that prevailed in recent years, even as the firm's concession tracker still points to some remaining softness. The national multifamily vacancy rate stands at 7% in October, still high by long-term standards but continuing to decline after peaking earlier this year.

Some Sun Belt markets that had faced elevated vacancies because of heavy construction are also starting to recover. Austin, Phoenix and Tampa are showing improvement, although Phoenix, Las Vegas and San Antonio are still posting the steepest rent declines, while the San Francisco Bay Area leads the country in rent growth, followed by San Jose, California.

In our earlier coverage of rising long-term Treasury yields, we explained how borrowing costs above 5% were tightening financial conditions and pushing 30-year mortgage rates higher, weighing on housing activity such as pending home sales. We also noted that elevated yields compound U.S. fiscal pressure as deficits near $2 trillion, with political gridlock limiting the prospects for near-term deficit reduction.

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