SEATTLE, WA — The U.S. housing market is cooling as median home-sale prices climbed just 3.5% year-over-year for the four weeks ending February 23, marking the smallest annual increase since September, according to a new report from Redfin. This slowdown, coupled with declining mortgage rates and rising supply, is shifting the dynamics in favor of buyers.
Mortgage rates have dropped from 7.13% to 6.78% over the past two weeks, reaching their lowest level in more than two months. This decline has boosted buyers’ purchasing power by thousands of dollars. Redfin attributes the rate drop to signs of a slowing U.S. economy and heightened recession fears.
The inventory of homes for sale has also increased, providing buyers more leverage during negotiations. The market now has 4.6 months of supply, compared to 4 months this time last year, and properties are selling for approximately 2% below their asking price.
“There are bidding wars for relatively affordable homes, under $400,000 or so, and for upscale, fully renovated homes in popular neighborhoods,” said Redfin Premier agent Alison Williams in Sacramento, CA. “But for everything in between, buyers are looking online and touring, but not jumping on them. The buyers who are jumping are getting deals.”
Shifting Buyer Behavior
Signs suggest that favorable conditions are piquing buyer interest. Redfin’s Homebuyer Demand Index—a seasonally adjusted metric tracking tours and other services—has reached its highest level since the start of the year. Similarly, Google searches for “homes for sale” have hit their highest level since September.
Despite this renewed interest, pending home sales remain sluggish, down 6.2% from the same period last year. Although mortgage rates are lower, housing affordability remains a challenge, with the typical monthly payment just $32 below its peak.
Redfin agents in several regions are advising buyers to act now. “If you’re thinking of purchasing a home in the next six months, don’t wait until the flowers start blooming,” Williams said. “The market will heat up as we get closer to spring. Now is the time to potentially negotiate down the price of a home, save money on closing costs, or get the sellers to cover issues uncovered in the inspection.”
Challenges Ahead
While higher supply levels have temporarily eased competition, new listings are growing at a slower pace. Listings increased just 2.4% year-over-year this week, marking the smallest rise in a month. This could deplete inventory in the coming weeks, especially if declining mortgage rates spur buyers to make offers.
With economic uncertainty looming, some buyers remain cautious, wary of mortgage rates potentially climbing back above 7%. However, with declining rates, increased inventory, and slowed price growth, current market conditions present an opportunity for those ready to make a move.
All eyes are on the spring market, which could see renewed competition for homes if supply tightens and economic signals remain mixed.
For the latest news on everything happening in Chester County and the surrounding area, be sure to follow MyChesCo on Google News and MSN.