SEATTLE, WA — The latest report from Redfin reveals a nuanced picture of the current housing market. As of the four weeks ending August 11, the typical buyer’s monthly housing payment stands at $2,588. This figure is nearly $250 below the all-time high recorded in April and represents just a 1% increase year-over-year, marking the smallest annual rise in five years.
Buyers can find some solace in the market’s evolving conditions. The total number of homes for sale has surged nearly 20% compared to last year, with an increasing portion of this inventory remaining unsold for extended periods. This trend provides potential buyers with more opportunities to negotiate favorable terms. Furthermore, less than 30% of homes are now selling above list price, down from 35% a year ago.
Despite these encouraging signs, pending home sales have not yet rebounded. Pending sales have declined by 5.1% year-over-year, the most significant drop since November, aside from the previous four-week period, which saw a 6.2% decline. Several factors contribute to buyers’ hesitancy, including persistently high home prices, economic uncertainty, and political factors surrounding the upcoming presidential election. Additionally, there is speculation about whether mortgage rates will decline further and if the U.S. will enter a recession.
However, there are indications that more prospective buyers are initiating the homebuying process. Mortgage-purchase applications have increased by 3% on a seasonally adjusted basis from the previous week. Redfin’s Homebuyer Demand Index, which tracks requests for tours and other buying services, is down 10% year-over-year. Notably, this is the smallest annual decline since April.
“I was hoping more buyers would emerge when mortgage rates started declining. And while house hunting has picked up a bit, the increase isn’t all that significant,” said Brynn Rea, a Redfin Premier agent in Spokane, WA. “Budgets are typically the most important factor for buyers, and homes are still really expensive for a lot of people. A lot of buyers are waiting to see if mortgage rates fall more if and when the Fed cuts interest rates, and to see what happens with the economy and the election later in the year.”
The recent Consumer Price Index (CPI) report indicates that inflation continues to ease, reinforcing the expectation that the Federal Reserve might start cutting interest rates in September. However, the extent of these cuts remains uncertain. Market expectations for aggressive rate cuts have been priced in, but if the Fed does not meet these expectations, mortgage rates could rise slightly. Conversely, if the Fed cuts rates more swiftly than anticipated, mortgage rates have further room to fall, potentially driving up demand and, subsequently, home prices.
As the market adapts to these shifting dynamics, buyers and sellers alike must navigate a landscape marked by both opportunity and uncertainty.
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