Homebuyer demand is rising as mortgage rates continue to decline, according to a new Redfin report.
On Dec. 1, daily rates fell to 6.29% according to the report, a full percentage point lower than the 7.29% peak last month. With that drop, Redfin found mortgage-purchase applications grew 4% from the previous week. Meanwhile, Redfin’s Home Buyer Demand Index, which measures requests for tours and other services, rose 1.5% from last month.
Those changes in rates and demand are keeping some sellers from dropping prices as they had been recently. In the four weeks ended Nov. 27, just over 6% of homes listed had a price drop — down 7.2% from the previous week.
While this is all good news for the housing market, Redfin deputy chief economist Taylor Marr says we’re still not out of the woods.
“Key indicators of homebuying demand will likely be teetering on a knife’s edge with every data release that comes out related to the Fed’s path to eventually bringing rates down,” Marr said. “We’re likely past peak inflation, past peak mortgage rates and past the bottom for mortgage purchase applications. But there’s further cooling ahead for the housing market, as sales and prices have further to fall before buyers and sellers become comfortable with homebuying costs again.”
According to the report, in 10 of the 50 most populous metros, home prices are falling from last year. They include an 8.2% year-over-year drop in San Francisco, 2.8% in San Jose, California, 2.7% in Pittsburgh, 2.3% in Detroit, 1.7% in Sacramento and 1.3% in Austin. Chicago, San Diego, Los Angeles and Philadelphia had declines of less than 1%.
The declines in Austin and Los Angeles represent the first year-over-year decreases since mid-2019. In Chicago, it’s the first time prices fell since June 2020.
During the four weeks ended Nov. 27, Redfin’s Homebuyer Demand index increased — up 1.5% from the previous month but down 20% from the year-ago period.
Thirty-year mortgage rates fell to 6.49% in the week ending Dec. 1, while mortgage applications rose 4% week over week during the week ended Nov. 25, despite purchase applications falling 41% from 2021. The lower rate brought the average monthly mortgage payment on a median-priced home to $2,342, down slightly from the previous week and down 8% from three weeks prior, when mortgage rates were 7.08%.
Pending home sales fell 35.5% from last year, marking the largest decline since January 2015.
Redfin found fewer Google searches for “homes for sale” during the week ended Nov. 26, down 40% from last year.
In the four weeks ended Nov. 27, active listings rose 12.9% from last year. Meanwhile, new listings fell 21% from last year, one of the largest declines since May 2020.
The median asking price rose 4.8% from 2021 to $359,725, the slowest annual growth since the pandemic began. Meanwhile, the median sale price increased 2.4% year over year to $357,073, up just slightly from the week before, according to the report.
Thirty-two percent of homes that went under contract had an offer within the first two weeks, showing little change from the previous four weeks but down from 40% last year. Twenty-five percent of homes sold above list price, down from 42% last year and the lowest percentage since June 2020.