Rising Mortgage Rates Haven’t Yet Slowed Pending Sales
The real estate market is currently experiencing a notable shift, with pending home sales showing a significant increase despite rising mortgage rates. For the four weeks ending October 13, 2024, pending U.S. home sales rose by 3.2% year over year, marking the largest increase since 2021. This growth is particularly evident in 34 of the 50 most populous U.S. metropolitan areas, with California and Portland, OR, leading the surge. This uptick in sales is attributed to a recent drop in mortgage rates to a two-year low at the end of September, following the Federal Reserve's interest-rate cut. However, it is important to note that this comparison is made against a period in 2023 when sales were notably low due to mortgage rates nearing a two-decade high.
Despite the recent dip, mortgage rates have begun to climb again, influenced by a stronger-than-expected jobs report on October 4. The weekly average 30-year mortgage rate has increased to 6.32%, up from 6.08% at the end of September. Concurrently, home prices have risen, with the median sale price increasing by 4.7% year over year, the largest rise since March. This has resulted in the typical homebuyer's monthly payment increasing by nearly $100 from the previous month.
While pending sales are on the rise, other indicators of homebuying demand, such as home tours and mortgage-purchase applications, have plateaued. The Redfin Homebuyer Demand Index, which measures tours and other buying services, has slightly decreased from its six-month high but remains 7% higher than the previous year. Mortgage-purchase applications have dropped by 7% week over week, although they are still trending upwards compared to last year.
Sellers are also showing caution as mortgage rates rise, with new listings increasing by only 3.6% nationwide, the smallest year-over-year increase in a month. In Minneapolis, buyers are negotiating more aggressively to offset the high mortgage rates, a strategy that sellers are receptive to, preferring to sell before the holiday season.
Leading indicators provide further insights into the housing market dynamics. The daily average 30-year fixed mortgage rate stands at 6.63% as of October 16, near its highest level in three months, yet down from 7.69% earlier. The Redfin Homebuyer Demand Index has increased by 6% from a month earlier, marking the biggest rise in over a year. Touring activity has decreased by 2% from the start of the year, a significant improvement from the 12% decline at the same time last year.
Key housing-market data for the four weeks ending October 13, 2024, reveals a median sale price of $384,412, a 4.7% increase year over year, the largest since March. The median asking price has risen by 6%, the biggest increase in two years. The median monthly mortgage payment is now $2,566 at a 6.32% mortgage rate, up from $2,489 a month earlier. Pending sales have reached 76,447, a 3.2% increase, the largest in nearly three years. New listings total 85,943, a 3.6% rise, while active listings have increased by 16%, the smallest rise since March. The months of supply have increased by 0.6 points to 4, indicating a balanced market.
At the metro level, Fort Lauderdale, FL, Milwaukee, Providence, RI, Chicago, and Nassau County, NY, have seen the largest year-over-year increases in median sale prices, while Austin, TX, San Antonio, Nashville, TN, Tampa, FL, and Fort Worth, TX, have experienced declines. Portland, OR, Los Angeles, Anaheim, CA, San Jose, CA, and Seattle have seen the most significant increases in pending sales, while Tampa, FL, West Palm Beach, FL, Fort Lauderdale, FL, Miami, and Orlando, FL, have seen decreases. New listings have increased the most in San Jose, CA, Phoenix, Sacramento, CA, Seattle, and Baltimore, MD, while Tampa, FL, Atlanta, West Palm Beach, FL, Orlando, FL, and Fort Lauderdale, FL, have seen declines.
