270,000 homeowners who bought last year owe more than its worth

About 270,000 homebuyers who bought during the red-hot housing market this year already owe more than their house is worth, a new analysis found.

Among the 450,000 underwater borrowers in the third quarter, nearly 60% had mortgages originated in the first nine months of 2022, Black Knight found. That's about 1 in 12 homes purchased in 2022 with a mortgage, or 8%. Nearly 40% of homes bought this year have less than 10% of equity left to tap.

The figures reflect yet another fallout from rapidly rising mortgage rates this year, which have put pressure on housing values as home price growth cools at a record pace month over month.

“Though the home price correction has slowed, it has still exposed a meaningful pocket of equity risk,” Ben Graboske, president of Black Knight data and analytics, said in a news statement. “Make no mistake: negative equity rates continue to run far below historical averages, but a clear bifurcation of risk has emerged between mortgaged homes purchased relatively recently versus those bought early in or before the pandemic.”

Redfin Demand index ticked up this week as rates decline

Redfin's Homebuyer Demand Index ticked up this week as steadily declining rates lured some buyers back in. But many would-be buyers are waiting for lower rates and prices, with the typical home's time on market rising at its fastest annual pace on record and supply increasing.

—The total number of homes for sale increased 15% year over year during the four weeks ending December 4, the biggest uptick since at least 2015, according to a newreportfrom Redfin (redfin.com), the technology-powered real estate brokerage.

New listings declined by more than 20%, which means homes are sitting on the market as prospective buyers stay on the sidelines and wait for mortgage rates and home prices to decline further from their peaks. That's also evidenced by a slowing market: The typical home that sold was on the market for 37 days, up from a record low of 17 days in June and up from 28 days a year earlier, the biggest year-over-year slowdown on record. Just 30% of homes sold within two weeks, the lowest share since January 2020.

But Redfin's Homebuyer Demand Index is rebounding from its low point, up 5% from a week earlier, as mortgage rates continue to decline from their early-November peak. Rates dropped to 6.33% from 6.5% a week earlier, cutting the typical U.S. homebuyer's monthly housing bill by about $50.

"This week has been relatively calm and quiet as we approach the end of one of the most volatile years in housing history," said Redfin Deputy Chief Economist Taylor Marr. "But it's not over yet. Next Tuesday's inflation report is the 500-pound gorilla in the room, and the Fed's press conference the next day will bring us much more clarity on how soon and how quickly we can expect mortgage rates to come down in the new year. Since we expect only a small decline in prices next year, mortgage rates will dictate housing affordability, and as a result, demand and sales, in 2023. If rates continue declining, more buyers may wade back into the market, as they'll have lower monthly payments."

Home prices fell from a year earlier in 11 of the 50 most populous U.S. metros, mostly in California

Home-sale prices fell from a year earlier in 11 of the 50 most populous U.S. metros, six of which are in California. Prices fell 7.8% year over year in San Francisco, 3.6% in San Jose, CA, 2.2% in Los Angeles, 1.4% in Detroit, 1.2% in Sacramento and 1.1% in Pittsburgh. They declined less than 1% in Oakland, CA, Anaheim, CA, Austin, Philadelphia and Phoenix.

Although the decline was small, this marks the first time Phoenix home prices have fallen on a year-over-year basis since at least 2015, as far back as this data goes. It's the first time Anaheim prices have fallen since October 2019.