As rates approach 5%, Redfin expects them to discourage buyer demand by forcing buyers to back off as the cost of buying a home exceeds their budgets. There are several warning signs that this change is starting to happen.

Fewer people are starting online home searches and applying for mortgages than this time last year, and year-to-date growth in home visits remains well below 2021 levels. more and more sellers are reducing their prices after putting their homes on the market.

Even so, the market still looks hot, with homes selling faster and for more money than ever before. That’s largely because supply remains near record highs, with fewer homeowners putting their homes on the market, according to Redfin.

“Homebuyers may not feel like the market has gotten any easier. This is because they often compete with investors, cash buyers and migrants from expensive cities who are not as sensitive to mortgage rates,” said Redfin chief economist Daryl Fairweather in a statement. “But there are early indicators that the market is turning, and we expect the slowdown to become more apparent in the coming weeks, possibly causing house price growth to slow. We will be watching closely to see if the market slows down from 100 mph to 90 or 100 mph to 75.”

In March, Redfin began receiving fewer requests than a year ago for agent services in coastal markets, including Seattle, San Diego, Boston and Washington, DC. These markets are seeing a year-over-year decline in pending sales, although they are still seeing homes. are selling relatively quickly and are not yet seeing outsized growth from sellers reducing their list prices. The decline in searches, tours and mortgage applications is greater in California than elsewhere.

“I’m starting to see warning signs that the housing market is slackening, which I wouldn’t have said a month ago,” said Aaron McCarty, Bay Area Redfin real estate agent. “Bidding wars are still common, but houses that would have made 10 or more bids earlier this year are now getting half that. Houses are also not selling as astronomically relative to asking price as they once did. A home that might have cost $700,000 more than the list price two months ago may now cost $300,000 or $400,000 more. It’s not always the case, but I find more opportunities for my clients where the competition is a little more manageable.