Housing market recovery threatened by mortgage rate pop - HousingWire
The housing market has shown signs of improvement in recent weeks, with both home sales and prices experiencing an upward trend. However, this positive momentum may be short-lived due to recent strong economic indicators, particularly in employment, which have led to an increase in bond market rates. Consequently, mortgage rates, which had recently dipped, have risen again, with the 30-year fixed rate surpassing 6.5%. This increase has tempered the brief surge in refinancing activity observed in September. While the purchase market has been slower to react, the data still reflects the benefits of the lower rates from previous weeks.
The recent uptick in mortgage rates highlights the fragility of the housing market's recovery. As rates approached 6%, there were noticeable gains in home prices and sales compared to the previous year. Indicators such as price reductions have stabilized, and the rate of home sellers withdrawing from the market has decreased over the past month. Despite the low home sales in the fourth quarter of 2023, the current increase in buyers suggests that consumers are motivated by lower borrowing costs. However, if mortgage rates do not remain low, potential homebuyers may choose to delay their purchases. Although conventional wisdom suggests that mortgage rates will continue to decline, recent fluctuations indicate that this is not guaranteed.
Pending home sales have been on the rise, with 362,000 single-family homes currently under contract, up from 357,000 earlier in September. This represents a nearly 1% increase over the week and a 6% increase compared to the previous year. Homes typically remain under contract for 30 to 40 days, leading to a decrease in sales at the beginning of each month as transactions close. As October begins, the number of ongoing sales is expected to decrease.
Home prices have also seen an unexpected increase, with the median price of homes under contract this week reaching $395,000. This marks the fourth consecutive week of rising home prices, which is unusual for the fall season when prices typically decline.
