Are you selling your home? You may have to wait a long time.
Throughout January, mortgage rates stayed high, which depleted the housing market’s vigor.
Industry sources report that home sales have stagnated despite a 1 basis point decrease in the 30-year mortgage rate to 6.95% on January 30.
Compared to a year ago, mortgage rates haven’t altered significantly. According to Freddie Mac data, the 30-year rate averaged 6.63%. However, the costly housing market is wearing on buyers.
According to data from real estate firm Redfin (RDFN) and real estate website Realtor.com, homes on the market are selling at the slowest rate in five years.
Due to customers pulling out of the market, sales have stalled. One major factor influencing home sales is mortgage rates.
Buyers retreated toward the end of 2024 as rates increased. The number of contracts signed to buy a property, or pending home sales, decreased by 5.5% in December. The National Association of Realtors reported that it was the first decline in five months.
Real estate is selling at the slowest rate in five years.
The market’s reception has been cold despite the influx of new vendors.
According to Realtor.com, there were 11% more properties on the market in January than there were at the same time previous year. Homes for sale had a median price of $400,500.
(Move Inc., a subsidiary of News Corp., operates Realtor.com; Dow Jones, the publisher of MarketWatch, is also a News Corp. subsidiary.)
However, purchasers showed no interest: according to Realtor.com, these residences were listed for 73 days, the slowest rate for January since 2020.
Redfin’s stats were comparable. According to the company’s data, the average home took 54 days to enter into a contract, which is the longest since March 2020. They used data from the four weeks that ended on January 26.
Indeed, the market was still advancing more quickly than it had during the pre-pandemic period. Between 2017 and 2019, the average January house for sale was still moving 11 days faster than it did prior to the pandemic, according to Realtor.com.
However, consumers are still getting used to the new normal because the epidemic was such a crazy time for the home market. According to Redfin, the average home sold in 35 days during the 2022 pandemic home-buying boom.
According to Redfin, a house buyer would have to pay about $2,800 a month in mortgage payments to afford a median-priced $377,000 home at a 7% mortgage rate. According to Freddie Mac, the 30-year mortgage rate averaged 3.51% on January 30, 2020, five years ago.
When will the real estate market bounce back?
Lower mortgage rates are the key that could break the housing market’s impasse.
People are more inclined to rush in to refinance their mortgage or buy a home when interest rates are lower.
Significant demand is waiting for an opportunity, as evidenced by the increase in mortgage activity following the rate drop in September of last year.
Read more: As U.S. mortgage rates plunge to two-year lows, homeowners rush to refinance
In a note, Oliver Allen, a senior U.S. economist at Pantheon Macroeconomics, stated that “a sustained recovery in the housing market would require market mortgage rates to fall a long way from their current level of around 7%.”
What time will that occur? Allen predicted that the Federal Reserve would lower interest rates by easing its monetary policy during the year.
The 30-year rate is expected to drop from today’s 7% level to end the year at 6.5%, according to Fannie Mae, which also backs residential mortgages.
However, the so-called lock-in effect is still a barrier, so that decline might not be sufficient to spark the market.
Since buying would need a more expensive home with a higher mortgage rate, homeowners with ultralow rates are locked into their mortgages and are therefore not interested in selling.
Because of that lock-in impact, supply has remained below average. According to Realtor.com, the number of properties for sale on the market in January is still 25% fewer than the average levels observed between 2017 and 2019.
“The average interest rate on an existing mortgage remains barely over 4%, so even a relatively marked decline in market rates on new mortgages would still leave it prohibitively expensive for many existing homeowners to move,” Allen stated.
“Expect the frozen housing market to remain [icy] for a while yet,” he stated.
