Falling mortgage rates have already breathed “new life” into the U.S. housing market, a new report by Redfin
RDFN,
says, and that momentum could pick up as rates continue to inch downward.
Home buyers got some good news this week when the average rate on the 30-year fixed-rate mortgage fell below 7% for the first time since August, on the back of the U.S. Federal Reserve signaling a pivot to cutting interest rates.
But buyers and sellers who were growing “tired” of waiting on the sidelines had already begun wading back into the housing market as mortgage rates fell from a near-8% peak in October, Redfin said on Friday.
Three indicators showed activity was picking up, Redfin said: In the month of November, new for-sale listings and pending home sales climbed to the highest level in roughly a year, and home prices posted the biggest annual increase since late 2022.
New listings in November rose by 1.3% from the previous month, to the highest level since October 2022, Redfin said. Pending home sales rose 2% in November as compared with the previous month, the company noted, and was at the highest level in a year.
Home prices are also trending upward. The median U.S. home sale price was $408,732 in November, Redfin said, which was up 3.7% from a year ago. That’s the biggest increase since October 2022.
Sellers are also beginning to shake themselves free from the so-called lock-in effect, Stein noted, which is helping inventory. The lock-in effect refers to people being reluctant to put their house on the market, because they don’t want to let go of a relatively low mortgage rate.
Changing life stages also play a role. Buyers and sellers are “making moves now because they can only wait so long to be near their grandkids, live in an RV like they’ve always dreamt of or finalize their divorce,” Shay Stein, a Las Vegas-based real-estate agent with Redfin, said in a statement.
“A year ago, sellers had trouble understanding why they weren’t getting $20,000 over the list price like their neighbor did during the pandemic homebuying boom,” she said.
“Now, they understand that to sell their home, they need to price it fairly,” Stein added, “and in some cases offer the buyer concessions like money toward closing costs or mortgage-rate buydowns.”
Most economists expect rates to go even lower, ending the year in the low 6% range.
Experts interviewed by MarketWatch believe that if the 30-year mortgage rate falls to 6% and below, that would spur a solid boost to housing market activity. One group dubbed a rate of 5.5% as the “magic mortgage rate” that would be attractive enough for homeowners to finally sell.
See also: When will mortgage rates come down? Realtor.com says buyers will ‘start to see some relief’ in the new year.
