Declining housing payments have yet to put a dent in home sales, as prospective buyers teeter the homeownership fence. However, demand and competition could return to the housing market soon, if mortgage rates retreat as expected.
Pending home sales fell 8.4% year over year in the four weeks ending September 1 – the biggest decline in nearly a year, according to a new report from Redfin. At the same time, the median monthly housing payment in the U.S. fell to $2,534 – the lowest level since January and nearly $300 less than April's all-time high.
So despite the fact that mortgage rates have dropped to their lowest level in a year-and-a-half, home prices are still near record highs and some would-be buyers are currently priced out of the market, according to Redfin agents.
Others are waiting for clarity on the National Association of Realtors’ (NAR) new rules on agent compensation, as well as the results of this November’s Presidential Election.
“There is demand for desirable, move-in ready listings, but some house hunters are in a holding pattern because the industry is in flux,” said Van Welborn, a Redfin Premier agent in Phoenix. “Some buyers are waiting to see how the NAR rules shake out before they get serious. Others believe rates will come down more substantially after the Fed cuts interest rates later this month, and they’re waiting for that to happen before they buy.”
Financial markets have already factored in expected cuts to interest rates by the Federal Reserve Open Market Committee during its meeting September 17-18. Mortgage rates could rise if the Fed cut is minimal, or decline further if the cut is more substantial. Analysts anticipate demand, competition and home prices to inflate if the latter scenario pans out.
Either way, prospective buyers are still touring homes and prepping to purchase. Redfin’s Homebuyer Demand Index is up 4% from a month ago – approaching its highest level since May.
Meanwhile, lagging inventory is starting to pick up, with new listings up 3.7% YOY, and total listings up by 16.6%.
