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Fed Rate Hike Doesn’t Alter Redfin’s Spring Housing Outlook

David Krechevsky
Mar 27, 2023
Redfin house price

Says spring home-sale season starts with steady demand, but lack of listings holds back sales.

  • Mortgage-purchase applications are up 17% from a month ago.
  • Touring activity as of March 18 was up about 18% from the start of the year.

Last week’s decision by the Federal Reserve to modestly hike interest rates, and that they may pause them sooner than anticipated, brought mortgage rates down for the second week in a row, according to a new report from Redfin.

The Seattle-based technology-powered real estate brokerage said that, overall, the Fed’s announcement doesn’t change its overall housing-market outlook for the spring. Mortgage rates are likely to temporarily decline but not plummet, and demand is likely to swing up and down based on fluctuations in rates and availability of homes on the market, Redfin said.

“We’re not seeing the typical spring seasonal increase in business,” said Boise Redfin agent Shauna Pendleton. “There’s no seasonality; homebuyers and sellers are hyper-focused on mortgage rates. If rates end the week down, all of a sudden buyers are out there making offers. If rates end the week high, buyers disappear.”

Demand Increases

Last week, demand ticked up as declining mortgage rates brought buyers some relief. After the Fed’s announcement, average daily rates dropped from 6.75% to 6.45% and the average weekly rate dipped to 6.42%, bringing the typical U.S. homebuyer’s monthly housing payment down from the peak it reached two weeks ago. 

Mortgage-purchase applications are up 17% from a month ago after increasing for the third straight week, and the number of homebuyers contacting Redfin agents for tours and other services rose last week.

Still, prospective buyers are struggling with the housing tight supply, as sellers are typically slower to return than buyers. New listings of U.S. homes for sale fell 22% from a year earlier during the four weeks ending March 19, one of the biggest declines since the housing market nearly ground to a halt in the beginning of the pandemic (new listings fell slightly more in December 2022). 

Many would-be sellers are reluctant because they want to hang onto a low mortgage rate — nearly all homeowners have a rate under 6% — and because they’re also buyers struggling with low inventory.

Because there’s so few houses to choose from, homebuying speed is picking up even while rates stay high and demand remains low compared with last year. Nearly half of homes that went under contract had an accepted offer within two weeks of hitting the market, the highest share since June, Redfin said. That’s partly due to typical seasonality, as the market usually picks up speed as spring starts, but the lack of inventory is causing houses to sell faster than expected when buyers are contending with 6%-plus rates.

Competition could pick up more as this spring if mortgage rates stay closer to 6% than 7%, which is more likely after the Fed’s announcement, Redfin said.

“The banking-industry chaos of the last few weeks likely prevented the Fed from making a big, inflation-fighting hike this week that could have sent mortgage rates soaring,” said Redfin Chief Economist Daryl Fairweather. “They kept the hike small partly because banking turmoil naturally combats inflation. As a result, the housing market is in a better place now than it was a few weeks ago.”

“Mortgage rates are unlikely to increase again unless the next inflation report is worse than expected,” Fairweather added. “Sidelined buyers should be on high alert in the coming days and weeks, which could offer a window to lock in a rate closer to 6% than 7%.”

Leading Indicators

  • For the week ended March 23, average 30-year fixed mortgage rates dropped to 6.42%. The daily average was 6.44% on March 23.
  • Mortgage-purchase applications during the week ended March 17 increased 2% from a week earlier, seasonally adjusted. Purchase applications were down 36% year over year.
  • Google searches for “homes for sale” were up about 48% from the bottom they hit in December during the week ended March 18, but down about 13% from a year earlier.
  • Touring activity as of March 18 was up about 18% from the start of the year, compared with a 23% increase at the same time last year, according to home tour technology company ShowingTime.

Key Market Takeaways

Unless otherwise noted, this data covers the four-week period ended March 19. Redfin’s weekly housing market data goes back through 2015.

  • The median home sale price was $358,420, down 1.7% from a year earlier. That’s the fifth week in a row of prices declining annually after more than a decade of increases. The latter is according to Redfin’s monthly dataset, which goes back through 2012.
  • Median sale prices fell in 24 of the 50 most populous U.S. metros, with the biggest drops in northern California. San Jose (-14.5% YoY) experienced the biggest decline, followed by San Francisco (-13.6%), Austin, Texas (-12.7%), Oakland (-11.3%) and Sacramento (-10.7%). That’s the biggest sale-price drop since at least 2015 for San Francisco, Austin, Oakland, and Sacramento.
  • Sale prices increased most in West Palm Beach, Fla. (12.7%), Milwaukee (11.3%), Fort Lauderdale, Fla. (10.6%), Virginia Beach\ (7.3%) and Miami (6.7%).
  • The median asking price of newly listed homes was $388,948, up 1% year over year.
  • The monthly mortgage payment on the median-asking-price home was $2,518 at a 6.42% mortgage rate, the current weekly average. Monthly mortgage payments are down slightly from the peak they reached two weeks ago, but up 19% ($410) from a year ago.
  • Pending home sales fell 17% year over year, the biggest decline in nearly two months.
  • Pending home sales fell in all 50 of the most populous U.S. metros. They fell most in Las Vegas (-54.2% YoY), Sacramento (-49.6%), Seattle (-47.3%), Portland, Ore. (-46.5%) and Riverside, Calif. (-45.2%).
  • New listings of homes for sale fell 21.9% year over year, the biggest decline since the start of the pandemic with the exception of mid-December 2022.
  • New listings declined in all but one of the 50 most populous U.S. metros, with the biggest declines in Sacramento (-48.6%), Oakland (-45.3%), San Francisco (-43.2%), San Jose (-41.6%) and San Diego (-41.3%). They increased 1.3% in Nashville, Tenn.
  • Active listings (the number of homes listed for sale at any point during the period) were up 15.4% from a year earlier, the smallest increase in more than three months.
  • Months of supply — a measure of the balance between supply and demand, calculated by the number of months it would take for the current inventory to sell at the current sales pace — was 2.9 months, down from 3.7 months a month earlier and up from 1.9 months a year earlier.
  • 46% of homes that went under contract had an accepted offer within the first two weeks on the market, the highest level since June, but down from 54% a year earlier.
  • Homes that sold were on the market for a median of 43 days. That’s up from 26 days a year earlier and the record low of 18 days set in May 2022.
  • 25% of homes sold above their final list price, the highest share in more than three months but down from 48% a year earlier.
  • On average, 4.8% of homes for sale each week had a price drop, up from 2.1% a year earlier.
  • The average sale-to-list price ratio, which measures how close homes are selling to their final asking prices, was 98.5%, the highest level in four months but down from 101.5% a year earlier.
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