The homebuying market isn’t blazing hot anymore, but there are signs that it’s getting “slightly warmer”.
A report published by Redfin found that mortgage-purchase applications were 4.6% higher in December from a month ago. Its homebuyer demand index- which tracks requests for tours- also saw a 6.5% increase.
The slight increase in homebuying activity hasn’t translated to more pending home sales or new listings. The upcoming holiday season is also typically slow, so the brokerage expects sale activity to tick up in mid-January.
“Quite a few buyers have come out of the woodwork in the last few weeks as rates have fallen,” said Shoshana Godwin, agent at Redfin, in a written statement. “Today’s market isn’t nearly as hot as it was earlier this year, and I don’t expect it to return to those levels. But it’s getting warm.”
With average rates declining for the sixth straight week to 6.27% and home price growth losing momentum, the market is looking “a bit more favorable for buyers than in the fall,” the report said.
The median home-sale price rose just 2.6% in November from a year earlier, the smallest gain since May 2020, when the onset of the coronavirus pandemic brought the housing market to a near halt. Lower rates in December also cut nearly $300 from an average monthly housing payment since it hit a peak in late October with 7% rates, the report said.
Inventory is also showing signs of improvement as properties sit on the market for longer. Per the report, houses are sitting on the market for an average of 39 days before going under contract, the longest period since 2020, contributing to the biggest supply increase on Redfin’s record.
This gives the opportunity for borrowers who were outbid during the buying boom “to seize this moment because they can take their time touring homes and negotiate on price and terms with sellers,” Godwin said.
Another report published Thursday by the brokerage was cautiously optimistic about future origination activity, forecasting that “demand and competitive offers could pick up in the coming months.”
“The worst of inflation is likely in the rearview mirror,” said Chen Zhao, economics research lead at Redfin. “We do anticipate that mortgage rates will decline slightly further in 2023 as the Fed’s actions continue to bring inflation down, which should ultimately bring more homebuyers back to the market. Still, we have a ways to go until we reach recovery mode, and we may see sales continue to ebb in the short term.”