U.S. Homebuyer Demand Dipped in October to a Three-Year Average, Fueled by Short Inventory

According to the seasonally-adjusted Redfin Housing Demand Index, homebuyer demand in the United States declined by 3.5% in October, falling to a level of 100. This level represents the historical average for the housing market between January 2013 and December 2015, indicating that buyer activity has returned to recent historical norms after a period of heightened activity. The primary driver behind this cooling appears to be a persistent and significant shortage of homes for sale, with listings across 15 major metros down 9.5% year-over-year.

What Do the Key Demand Metrics Show?

The decline in the overall index is supported by two key metrics. In October, the number of Redfin customers requesting home tours fell by 3.7% from September. More notably, the number of customers writing offers decreased by 5.9%. This pullback follows a September that saw double-digit increases in both areas. Based on our experience assessment, this shift suggests that buyers are facing limited choices, which is tempering their enthusiasm and slowing the pace of transactions compared to the previous month.

Why Did Buyer Demand Decrease Nationally?

A leading factor contributing to the demand cooldown is the constrained supply of available homes. The national housing market continues to grapple with low inventory, a challenge that has persisted for many months. When the number of homes listed for sale drops significantly—as evidenced by the 9.5% year-over-year decline—it directly impacts buyer behavior. With fewer options, potential buyers may delay their search or become more selective, leading to a measurable decrease in tour requests and written offers.

How Did Regional Markets Perform Differently in October?

The national trend does not tell the whole story, as individual metropolitan areas experienced considerable variation.

• Denver: The Denver market exemplified the inventory crunch, with the number of homes for sale down 22.3% compared to the previous year. Its Demand Index fell to 102 from 113 in September. However, local agents report a resurgence of buyer interest in November, particularly for homes priced below $400,000, where multiple offers are re-emerging due to severe scarcity.
• Chicago: After a tepid October with a Demand Index of 91, activity in Chicago began to pick up in November. Some buyers are motivated by the expectation that mortgage interest rates will continue to rise, creating a sense of urgency to purchase before the competitive spring market.
• Phoenix and San Diego: These cities represented opposite ends of the spectrum. Phoenix posted the largest month-over-month increase in demand, surging 28% to a level of 105. In contrast, San Diego saw the most significant drop, with its index falling 21% to 87. The decline in San Diego is attributed to a diminished sense of urgency among buyers and sellers adopting a "wait-and-see" approach with above-market pricing.

What is the Practical Outlook for Buyers and Sellers?

For prospective homebuyers, the current market requires patience and preparation. Focusing on a specific price range and getting pre-approved for a mortgage is more critical than ever, as competition can remain fierce for well-priced homes even in a cooling national market. Sellers should note that while demand has moderated from its peak, well-priced properties in desirable areas can still attract significant attention. The key takeaway is that local conditions vary dramatically; national trends may not reflect the reality of your specific city or neighborhood. Consulting with a local real estate expert can provide the most accurate assessment of current conditions.