What does the real estate market need after years of being first overheated during the COVID-19 housing boom and then effectively frozen by the high mortgage rates that followed? A run at plain old room temperature.
The market appeared to be heading in that more typical direction in the week ending Jan. 20.
“This past week, the housing market showed the early signs of a return to normal, with slowing median listing price growth, a growing inventory of homes for sale, and mortgage rates which have fallen more than a percentage point from their recent peak,” says Realtor.com® economic dMortgage rates for a 30-year fixed-rate home loan ticked up to an average of 6.69% for the week ending Jan. 25, according to the latest Freddie Mac data. Yet that figure “has remained within a very narrow range over the last month,” says Freddie Mac Chief Economist Sam Khater. (Last week’s rate averaged 6.60%.)
With nearly two months of winter left, will buyers and sellers brave the cold to take advantage of a surprisingly temperate market?
We’ll explain what the latest housing market data means for anyone tempted to get off the sidelines and into the real estate game in the latest installment of “How’s the Housing Market This Week?”
Where mortgage rates might be headed
All market watchers will be tuned in to see what the Fed does at its next meeting at the end of this month. Why? Because the Fed’s relentless raising of interest rates to tame ballooning inflation is what essentially triggered mortgage interest rates to double over the past two years.
Now, the Fed is poised to cut rates this year as inflation falls closer to its 2% goal. This will likely put pressure on mortgage rates to fall. However, those eagerly anticipated rate cuts aren’t likely until the spring or summer.
“Looking forward, recent employment and inflation data came in relatively strong, suggesting that the Fed will likely opt to hold the policy rate steady in their upcoming meeting,” explains Speianu. “Continued progress toward the 2% inflation rate target is expected, and this will eventually improve housing market conditions in 2024.”
Home prices finally budge
While the median home list price rose by 1.9% for the week ending Jan. 20 compared with the prior year, the growth in prices declined from the previous week. (The median listing hit $410,000 in December.)
This is good news for buyers who have been grappling with the high price hikes over the past few years. While prices are still rising, they’re doing so much more slowly than the double-digit price hikes experienced during the pandemic.
“Listing price growth appears to be cooling after reaching a 35-week high during the week ending Jan. 6,” says Speianu. “If this trend continues, homebuyers stand to benefit from a decline in mortgage rates and slower, moderate home price appreciation.”
The ongoing inventory uptick
The new year has brought a welcome trove of new homes for sale, which were a rare sight during a considerable stretch of last year.
New listings were up for the week ending Jan. 20 by 3.4% from one year ago. While this growth is less than last week’s 7% growth rate, “newly listed homes continue to rise above last year’s levels for the 13th week in a row,” notes Speianu.
Active listings (a measure of both old and new homes for sale) grew by 8.6% for the week ending Jan. 20 compared with the year prior. That marked an 11-week streak of annual growth.
And in promising news for buyers, there’s “no sign yet of a slowdown as growth in inventory,” says Speianu.
The case for not waiting for the spring market
Some buyers and sellers might be tempted to hold out for the busy spring housing market to kick into gear before getting off the proverbial bench.
Yet many home shoppers are already in the game—and snapping up properties.
The typical home flew off the listing pages four days faster in the week ending Jan. 20 than in the same period last year. (In December, homes spent an average of 61 days on the market.)
Chalk the faster pace of sales up to the influx of fresh listings and lower mortgage rates in a market filled with hungry buyers ready to pounce once they find homes they can afford.
Buyers ready to make the move and sellers who need another home to move to might want to act fast before prices—and the competition—rise even more.
“This year, the first few weeks of January are shaping up to look more like slower seasonal growth seen in the years 2017 to 2020, where listing prices begin to pick up later in February,” says Speianu.
Margaret Heidenry is a writer living in Brooklyn, NY. Her work has appeared in the New York Times Magazine, Vanity Fair, and Boston Magazine.