Tax reform, higher prices stall housing demand

Homebuyers have become more selective amid higher home prices and tax reform, according to the Housing Demand Index (HDI) released by Redfin.

Redfin’s HDI edged up 0.3% to 125.2 in August from July, remaining roughly unchanged for the past four months. The number of people requesting home tours rose 3.4% month over month, while the number of buyers making offers remained roughly flat. Homebuyers are now more choosy in an environment seeing an increase in price drops and softening demand in previously hot markets.

"The housing market is past the heydays of spring and early summer, when most homes received multiple offers from buyers desperate to get a home under contract," Redfin Senior Economist Taylor Marr said. "Several factors are contributing to stalling demand. Tax reform and higher home prices are causing homebuyers to be more careful about their decision-making. Meanwhile, buyers on the West Coast are finding that a growing supply of homes can work in their favor, enabling them to be more selective and make less aggressive offers. While overall demand still remains strong, easing inventory pressure is allowing home buyers to be more careful in their purchases."

Although demand has been steady through the last four months, Redfin noted that current levels are well below those recorded a year ago. August was the sixth straight month of year-over-year decreases in the HDI, which fell 11.9% in August. It was also the third consecutive month of annual declines, with the number of homebuyers requesting tours falling 3.5%. The number of homebuyers making offers dropped 20.2% year over year in August, the sharpest annual decline since March 2016.