The demand to buy homes has improved since the end of October as mortgage rates continued to steadily decline, according to a report from Redfin.
Mortgage purchase applications were up 14% from the end of October, while Redfin’s Homebuyer Demand Index — a measure of home-tour requests and other services from Redfin agents — is up 10%, the company said.
The weekly average came in at 6.31% this week, down from a peak of 7.08% during the last week of October, saving the typical homebuyer more than $200 on their monthly payment.
“Slowing inflation and the hope of the Fed easing rate hikes in the new year are likely to bring mortgage rates down further and thereby improve homebuying demand,” said Redfin Deputy Chief Economist Taylor Marr. “But don’t call it a comeback or even a recovery yet; demand is still way down from its peak."
Marr said Redfin is "keeping a close eye on the labor market for confirmation that inflation will continue slowing. A strong job market like the one we have now contributes to inflation because it pushes up wages and leads to higher prices. Though it seems counterintuitive, a slight uptick in unemployment and/or slower economic growth would likely help bring mortgage rates down further. If that happens, the increase we’re seeing in early-stage demand could translate to an uptick in pending sales in early 2023.”
The number of metros with declining sale prices is piling up, according to the report. Home-sale prices fell year over year in 15 of the 50 most populous U.S. metros, with many of them in California. Prices fell 7.3% year over year in San Francisco, 5.8% in San Jose, and 3.3% in Los Angeles.
The report also identified several indicators of homebuying activity in addition to lowering mortgage rates. Mortgage purchase applications during the week ending Dec. 14 increased 4% from a week earlier and 7.6% from a month earlier, seasonally adjusted. They’re up 13.8% from late October, when purchase applications fell to their trough. Still, purchase applications were down 38% from a year earlier.
The seasonally adjusted Redfin Homebuyer Demand Index was essentially flat from a week earlier, but up 5% from a month earlier during the four weeks ending Dec. 11. It was down 27%year-over-year.
The median home sale price was $353,750, up 1.4% year over year, the slowest growth rate since the start of the pandemic. The median asking price of newly listed homes was $354,779, up 3.9% year over year, the slowest growth rate since the start of the pandemic.
