Source: Redfin —
Pending sales posted their smallest year-over-year decline in three months as mortgage rates ticked down. Early indicators of homebuyer demand, including tour requests and mortgage applications, are increasing from their low point.
Pending home sales fell 26% year over year during the four weeks ending January 22, the smallest drop in more than three months. Pending sales began rising on a month-over-month basis in December as buyers started returning to the market, encouraged by their increased negotiating power and mortgage rates that have declined to 6.1% from their 7% peak. That signals the recent increase in early-stage homebuyer demand–mortgage-purchase applications are up 28% since November and Redfin home-tour requests are on the rise–is starting to translate into sales.
More demand from buyers and less supply from homeowners–new listings of homes for sale are down 18% from a year ago, though that’s a smaller drop than recent weeks–is holding prices steady. The median U.S. home-sale price rose 1.1% year over year to $350,000, the biggest increase in over a month. On a local level, the number of metros where prices are falling from a year earlier is shrinking. Home prices declined in 17 of the 50 most populous U.S. metros, with the biggest drops in the Bay Area, down from 20 at the beginning of January.
Redfin agents are reporting that mortgage rates dipping nearly a full percentage point over the last two months is bringing back some sidelined buyers and attracting new ones. They’re noticing an increase in interest from clients, including requests for tours, and reporting that some homes that have been on the market for months are finally going under contract.
“Homebuyers are starting to feel more confident as mortgage rates tick down closer to 6% than 7% and the overall economy chugs along with surprising resilience, especially in the labor market. Steadily cooling inflation is likely to prevent mortgage rates from jumping back up,” said Redfin Economics Research Lead Chen Zhao. “When rates were seesawing up and down in the fall, many buyers dropped out because they could wake up the day after finding their dream home to a three-digit increase in their potential monthly payment. Now they have a better sense of how far their budget will go in which neighborhoods and which homes they can afford.”
Leading indicators of homebuying activity:
- For the week ending January 26, 30-year mortgage rates dropped to 6.13%. The daily average was 6.18% on January 25.
- Mortgage-purchase applications during the week ending January 20 increased 3% from a week earlier and 28% from their early-November trough, seasonally adjusted. Purchase applications were down 39% from a year earlier.
- The seasonally adjusted Redfin Homebuyer Demand Index–a measure of requests for home tours and other homebuying services from Redfin agents–was up 6% from a month earlier during the four weeks ending January 22. It was down 29% from a year earlier.
