Home sales are rising, but for how long?
Pending home sales rose 3.2% year over year during the four weeks ending Oct. 13, the largest increase in three years according to a new report from Redfin. With mortgage rates and home prices on the rise, though, signs that buyer demand could slow are emerging.
Pending sales are up in 34 of the 50 most populous U.S. metros, with the biggest increases in California and in Portland, OR. Sales improved after mortgage rates fell to a two-year low at the end of September surrounding the Fed’s highly anticipated interest-rate cut. The last time pending sales increased in this many metro areas annually was in May 2021.
However, it should be noted that this comparison is with September and October 2023, when home sales dropped to historic lows as mortgage rates approached a two-decade high.
Redfin’s Homebuyer Demand Index – a measure of tours and other buying services from Redfin agents – fell marginally from the six-month high it hit two weeks ago, though it is up 7% year over year. Although still trending up from the year prior, mortgage-purchase applications are down 7% week over week, Redfin reported. New listings are up 3.6% nationwide, the smallest year-over-year increase in a month.
Falling demand is in part due to a stronger-than-expected jobs report the first week of October, which led mortgage rates to ascend over the last few weeks. The average 30-year fixed-rate mortgage rate is 6.44%, compared to 6.32% last week, according to Freddie Mac's Primary Mortgage Market Survey, released Thursday.
Median sale prices rose 4.7% year over year for the four weeks ending Oct. 13 – the largest uptick since March. This pushed the typical homebuyer’s payment up nearly $100 from the prior month.
Emily Olson, a Redfin Premier agent in Minneapolis, reported that higher rates and prices have yet to slow down buyers in her area.
“So far,” she said. “But buyers are negotiating more heavily than they have in years, trying to shave money off the home price because they’re taking on a pretty high rate. It’s a good strategy, because sellers are receptive to it. Sellers know every buyer taking on a mortgage is contending with high rates, and they would rather get their house sold now than let it linger on the market going into the holiday season.”
