Homebuyer activity is picking up, but rising rates continue to slow the market
The new year has brought a modest uptick in home tours, but higher mortgage rates continue to weigh on pending home sales, according to a report from Redfin.
Redfin’s Homebuyer Demand Index, a measure of tours and other homebuying activities facilitated by Redfin agents, rose 2% from the previous month and 2% year-over-year in the week ending January 5.
“Three of the four offers my clients have made in the last week have competed against other offers with competitive terms, like waiving all contingencies and releasing earnest money early,” said Emily Lam, a Redfin Premier agent in Seattle. “Some homes are getting multiple offers within 24 hours of hitting the market.”
High mortgage rates limit sales
The rise in interest coincides with a seven-month high in daily average 30-year fixed mortgage rates, which reached 7.17% on January 8. These elevated rates have not deterred all buyers; some are adjusting to the reality of sustained high rates while others are motivated by the new year or increased inventory.
However, the higher rates have hindered sales. Pending home sales fell 3.1% in the four weeks ending January 5 compared to the same period last year. Redfin noted that the year-over-year decline may appear larger because it is being compared to a period of unusually high demand in early 2024, spurred by a significant drop in mortgage rates.
Sellers hold back
On the supply side, new listings dropped 2.5% year-over-year, the steepest decline in over a year. Active listings, however, rose 10.6%, reflecting an accumulation of unsold homes. Despite this, the median sale price increased 5.5% to $379,988, while the median asking price climbed 4.5% to $374,975.
“Some buyers are getting serious about their search because they’ve come to terms with 7% rates and they’re worried that if they wait longer, home prices will just keep rising,” Lam said. “Others are starting their search in hopes that rates will decline soon. Either way, I’m advising buyers to get serious now because desirable listings will get more competitive as the year goes on.”
Do you have something to say about the recent announcement? Let us know in the comments below.
