The number of homes sold in February increased for the first time in eight months. Photo illustration: Fortune Original photo from Getty Images
The housing market suffered a deep freeze last year. The pandemic-induced housing boom sent home prices soaring, but then the Federal Reserve began raising interest rates to rein in inflation, which had reached a 40-year high. As a result, mortgage rates have skyrocketed from historic lows to peaking at just over 8%.
America has embarked on the most affordable housing market in decades. But those with low mortgage rates or simply no mortgage at all were essentially fine, holding on to their homes and further constraining supply to an already housing-starved market. And existing home sales have fallen to the lowest level in about 30 years. But things appear to be changing, and the so-called lock-in effect is easing.
“After eight months of decline, February is the first month in the year that the number of homes sold has increased on an annual basis,” Redfin data journalist Dana Anderson wrote in an article Thursday. Latest information on the housing market.
The number of new homes listed for sale in the four weeks to March 3 increased by 13% compared to a year earlier. This is the largest increase in nearly three years, according to Redfin. The total number of homes sold increased by 1.7% due to a rapid increase in new listings.
“Last year, there were two major hurdles for homebuyers: low inventory and high home prices,” said Chen Zhao, head of economic research at Redfin. “Now, as more supply enters the market, the initial barriers are starting to crumble.”
He added: “Housing costs remain high, but they are likely to come down a bit as mortgage rates fall gradually over the year and inflation loses some momentum.” Buyers who can afford current mortgage rates may have a better chance of finding a home than they have in the past few months and may face less competition as inventory improves. ”
The average 30-year fixed mortgage rate is less than 7%; currently sitting At 6.92%, it was the lowest since early February. While it’s a far cry from the roughly 3% mortgage rates that have prevailed during the pandemic, it’s significantly lower than 8% and a much easier pill for prospective buyers to swallow. This is why the lock-in effect is showing signs of easing in terms of increasing available inventory. Homeowners who previously resisted selling are likely realizing that historically low mortgage rates aren’t coming back, at least not anytime soon. And that’s exactly what people are doing because they’ve had to move for reasons beyond their control, whether it’s death, marriage, job opportunities, etc., and they can’t wait any longer.
As with most home-related products, there are regional variations in inventory. In terms of new listings, Fort Worth, Fort Lauderdale, Houston, Jacksonville and Miami were the metropolitan areas with the largest annual increases, all increasing new listings by more than 24%. In contrast, his three metropolitan areas – Atlanta, Newark and Chicago – saw a decline in new listings over the same period.
Still, Redfin says touring activity is up 23% since the beginning of the year (versus just 14% in the same period last year), and mortgage purchase applications are up 11% week over week. However, it may take longer for sales to increase.
Realtor.com Chief Economist: “We’re at a tipping point” Said At the end of January. Some economists predicted toward the end of last year that home affordability would ease slightly this year as mortgage rates gradually fall. Spring is considered an important sales season in the housing industry, and some of these trends reflect that. Still, there are signs of improvement and the season is only just beginning.
But as Redfin’s head of economic research explained, while supply may improve, housing costs remain an issue. His median sales price for the four weeks ending March 3 was $368,588, up 5.3% from last year. The median asking price was $399,223, up 5.1% from last year, but the smallest increase since mid-January, according to Redfin. And while the peak of home price growth may have passed, prospective home buyers still need to earn nearly $50,000 more than before the pandemic to buy a home.
