Nov 3, 2023
After rising for seven weeks straight, mortgage rates have finally hit a speed bump, falling to 7.76 % on average for a 30-year fixed-rate mortgage as of Nov. 2, according to Freddie Mac.
This hiccup comes on the heels of the Federal Reserve’s announcement on Nov. 1 to not raise benchmark interest rates in its ongoing fight against inflation.
“The Federal Reserve again decided not to raise interest rates,” said Sam Khater, Freddie Mac’s chief economist, “but have not ruled out a hike before year-end.”
While any drop in mortgage rates is welcome news for homebuyers, last week’s rate of 7.79% still hovers at a high not seen since 2000.
“The 23-year high in mortgage rates follows all-time lows reached just three years ago,” says Danielle Hale, chief economist for Realtor.com® in her analysis. This steep rise also “highlights the effect that financing costs have on the housing market–a particularly rate-sensitive sector of the economy.”
We’ll break down what all the latest real estate data means for buyers and sellers in this installment of “How’s the Housing Market This Week?”
Home prices head higher
In addition to high mortgage rates, homebuyers must contend with high home prices, which hovered at a nationwide median of $425,000 in October.
And for the week ending Oct. 28, home prices rose by 1.2%—the highest in 25 weeks—compared with the same time last year.
“Sustained prices can be attributed to the persistently low inventory of existing homes for sale,” says Realtor.com data scientist Sabrina Speianu in her most recent analysis. “Soft demand still continues to outpace the limited supply of homes.”
Home prices, in general, have been on a reasonably even keel since mid-July. And while prices aren’t falling, the market can find a tiny bit of solace in that they aren’t rising dramatically, either.
The intractable inventory issue
The not-so-secret ingredient the housing market needs to get cooking? Lots more homes for sale.
Nationwide, the number of homes for sale shrank by 1% for the week ending Oct. 28 compared with this same week last year, marking the 19th consecutive week of dwindling listings.
For anyone wondering just how low inventory levels are from a historical perspective, consider that the number of homes for sale is 41.8% below typical pre-COVID-19 levels.
“The usual seasonal buildup in inventory that makes this time of year favorable for buyers is underway, but from a longer-term macroeconomic perspective, housing remains undersupplied,” explains Speianu.
An abrupt reversal in new listings
But as days grow shorter, here’s a sliver of light: New listings were up by 5.6% for the week ending Oct. 28 from one year ago.
“Since mid-2022, new listings have registered lower than prior-year levels, as the mortgage rate lock-in effect freezes homeowners with low-rate existing mortgages in place,” says Speianu. “This past week, the trend abruptly reversed.”
But whether the trend will continue remains to be seen.
“While newly listed homes this past week exceeded the figures from the same week last year, the overall pace of listing activity still severely lags behind the levels seen before the pandemic,” says Speianu.
Homebuyers still need to act fast
Buyers who do find a great property in the meager home haystack don’t have much time to linger over a pro and con list.
For the week ending Oct. 28, homes spent one less day on the market compared with last year. (The average time on the market for a typical home was 50 days in October, more than two weeks shorter than before the COVID-19 pandemic.)
“The gap in time on the market narrowed over the last few months as buyers competed over fewer homes,” says Speianu. “This fall, the time a typical home spends on the market is growing much more slowly than is typical for this season.”