Housing Market Activity Lost Steam in January as Mortgage Rates Stopped Falling and Prices Kept Rising

Rhea-AI Summary

Redfin reports a drop in new listings for the first time since June, with pending sales growth slowing due to stagnant mortgage rates and a significant home-price increase. The housing market lost momentum as active listings and pending sales declined, impacting market activity. Home prices surged by 5.2% year over year, driven by a shortage of homes for sale.

Insights

Market Research Analyst

The recent data indicating a drop in new listings and a slowdown in pending sales growth has various implications for the housing market. A decrease in new listings, particularly the first since June, suggests a tightening of supply which can lead to increased competition for available homes, potentially driving prices up. The stagnation in mortgage rates at 6.6%, after a period of decline, may be causing hesitation among potential buyers, who might have been expecting further rate decreases to make their purchases more affordable.

Furthermore, the year-over-year increase in median sale prices, despite being the largest in 16 months, needs to be contextualized within the broader economic environment. Inflationary pressures and geopolitical concerns are influencing buyer sentiment, as indicated by the comments from the Redfin agent. The regional variations in market dynamics, such as the significant increase in pending sales in Las Vegas compared to the decline in Cincinnati, highlight the localized nature of real estate markets and the importance of understanding regional economic drivers.

Financial Analyst

From a financial perspective, the real estate market's performance can have ripple effects on various sectors, including banking, construction and retail. The report's findings could be of particular interest to investors in real estate investment trusts (REITs) and companies involved in home construction and furnishing. The increase in home prices, despite a slight decrease in active listings, indicates sustained demand which could benefit these sectors.

However, the potential long-term implications of sustained high mortgage rates could dampen demand and eventually lead to a correction in home prices. Investors should monitor the Federal Reserve's policy decisions closely, as any shifts in interest rate policy could have immediate effects on mortgage rates and, by extension, the housing market's trajectory.

Economist

The housing market is often seen as a bellwether for the broader economy and the current trends suggest a complex interplay between consumer confidence, inflation and monetary policy. The cooling of market momentum, as indicated by the reduction in pending sales and new listings, could be a preliminary sign of a broader economic slowdown. Additionally, the enduring shortage of homes for sale is a structural issue that reflects not only market dynamics but also broader economic policies and demographic trends.

It is worth noting that the housing market's health has direct implications for consumer spending, as home equity often translates into consumer confidence and spending power. Therefore, the current market conditions could have a more pronounced effect on the economy if the trend towards lower listings and sales continues.

Redfin reports new listings dropped for the first time since June and pending sales growth slowed; stagnating mortgage rates and the biggest home-price jump in over a year caused the market to lose momentum

SEATTLE--(BUSINESS WIRE)-- (NASDAQ: RDFN) — New listings dropped 1.2% month over month on a seasonally adjusted basis, the first decline since June, according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage. They were up 2.7% from a year earlier, but that marks a deceleration from December’s 4.2% gain.

Active listings (the total number of homes for sale) fell 0.3% from a month earlier on a seasonally adjusted basis—the first decline in six months—and were down 4.4% year over year.

Pending home sales also lost momentum in January, rising 1.1% from a month earlier on a seasonally adjusted basis—a marked slowdown from December’s 5.1% jump. Still, pending sales were at the highest level since September 2022 and rose 8.8% from a year earlier.

Stagnant mortgage rates are the main culprit that took the gas off the housing market pedal last month. They started and ended January at 6.6%—unexciting news after buyers and sellers at the end of last year watched rates drop the most since 2008. Homeowners are hesitant to sell because a majority of them still have mortgage rates below current levels, and selling often means taking on a higher rate.

“A lot of my customers are paying close attention to what the Federal Reserve says. Buyers and sellers came off the sidelines in December when the Fed signaled it would lower interest rates three times in the next year, but now some are getting cold feet because the Fed indicated that rate cuts may come later than expected,” said Hal Bennett, a Redfin Premier real estate agent in Bellevue, WA. “Inflation and geopolitical conflicts are also scaring some buyers. April, at the absolutely earliest, is when I think things could take off.”

Brutally cold temperatures across the country last month, along with rising housing costs, also likely contributed to the slight cooldown in market activity.

Home Prices Posted the Biggest Increase in 16 Months

The median U.S. home sale price climbed 5.2% year over year to $402,343 in January, the biggest jump since September 2022. Prices were little changed from a month earlier (-0.01%). Please note that home price data is not seasonally adjusted, which is why Redfin focuses on year-over-year changes for this metric.

America's enduring shortage of homes for sale is the primary driver of price growth; both new listings and active listings remained far below pre-pandemic levels in January.

January 2024 Highlights: United States
	January 2024	Month-Over-Month Change	Year-Over-Year Change
Median sale price	$402,343	0.0%	5.2%
Pending sales, seasonally adjusted	430,809	1.1%	8.8%
Homes sold, seasonally adjusted	392,446	-0.2%	-1.0%
New listings, seasonally adjusted	510,057	-1.2%	2.7%
All homes for sale, seasonally adjusted (active listings)	1,554,413	-0.3%	-4.4%
Months of supply	3.1	0.5	-0.3
Median days on market	49	6	-3
Share of for-sale homes with a price drop	16.9%	2.9 ppts	0.2 ppts
Share of homes sold above final list price	23.9%	-1.7 ppts	2.7 ppts
Average sale-to-final-list-price ratio	98.4%	-0.2 ppts	0.5 ppts
Pending sales that fell out of contract, as % of overall pending sales	14.2%	-1.5 ppts	0.9 ppts
Average 30-year fixed mortgage rate	6.64%	-0.18 ppts	0.37 ppts

Metro-Level Highlights: January 2024

• Pending sales: In Las Vegas, pending sales rose 43.4% year over year, more than any other metro Redfin analyzed. Next came Stockton, CA (40.9%) and Raleigh, NC (38.5%). Pending sales fell most in Cincinnati (-19.7%), Grand Rapids, MI (-16.2%) and Tulsa, OK (-11.9%).
• Closed sales: Closed sales rose most in Stockton (27.9%), San Jose, CA (19.9%) and Salt Lake City (18.1%). They fell most in Camden, NJ (-16.5%), Jacksonville, FL (-13.7%) and Buffalo, NY (-11.2%).
• Prices: Median sale prices rose most from a year earlier in Camden (14.3%), Miami (13.8%) and Knoxville, TN (13.6%). They fell in five metros, with the biggest declines in San Antonio (-4.9%), Austin, TX (-4.4%) and Memphis (-3.9%).
• New listings: New listings rose most from a year earlier in North Port, FL (31.9%), McAllen, TX (29.6%) and Fort Lauderdale, FL (27.1%). They fell most in Grand Rapids (-21.9%), Lake County, IL (-19.9%) and Kansas City, MO (-16.3%).
• Overall supply: Active listings increased fastest in Cape Coral, FL (57.9%), North Port (44.9%) and McAllen (24.2%). They decreased fastest in Raleigh (-28.5%), Las Vegas (-24.8%) and New Brunswick, NJ (-24.1%).
• Competition: In Rochester, NY, 66.2% of homes sold above their final list price, the highest share among the metros Redfin analyzed. Next came Newark, NJ (59.7%) and Buffalo (58.1%). The shares were lowest in West Palm Beach, FL (6.8%), North Port (6.8%) and Cape Coral (7.7%).
• Speed: In Rochester, 70.5% of homes that went under contract did so within two weeks—the highest share among the metros Redfin analyzed. Next came Seattle (65.7%) and San Jose (62%). The lowest shares were in Chicago (14.7%), Knoxville (16.9%) and Tucson, AZ (17.4%).

To view the full report, including charts, please visit:
https://www.redfin.com/news/housing-market-tracker-january-2024

About Redfin

Redfin (www.redfin.com) is a technology-powered real estate company. We help people find a place to live with brokerage, rentals, lending, title insurance, and renovations services. We also run the country's #1 real estate brokerage site. Our home-buying customers see homes first with same day tours, and our lending and title services help them close quickly. Customers selling a home in certain markets can have our renovations crew fix up their home to sell for top dollar. Our rentals business empowers millions nationwide to find apartments and houses for rent. Customers who buy and sell with Redfin pay a 1% listing fee, subject to minimums, less than half of what brokerages commonly charge. Since launching in 2006, we've saved customers more than $1.5 billion in commissions. We serve more than 100 markets across the U.S. and Canada and employ over 4,000 people.

For more information or to contact a local Redfin real estate agent, visit www.redfin.com. To learn about housing market trends and download data, visit the Redfin Data Center. To be added to Redfin's press release distribution list, email press@redfin.com. To view Redfin's press center, click here.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240216708381/en/

Redfin Journalist Services:

Ally Braun, 206-588-6863

press@redfin.com

Source: Redfin

FAQ

What caused the drop in new listings according to Redfin (RDFN)?

The drop in new listings was caused by stagnant mortgage rates and a significant home-price increase.

What was the year-over-year change in the median U.S. home sale price according to Redfin (RDFN)?

The median U.S. home sale price climbed by 5.2% year over year to $402,343 in January.

What was the main driver of price growth in the housing market according to Redfin (RDFN)?

The primary driver of price growth in the housing market was America's enduring shortage of homes for sale.

Which metro saw the highest rise in pending sales year over year according to Redfin (RDFN)?

Las Vegas saw the highest rise in pending sales year over year at 43.4%.

Which metro had the highest share of homes sold above their final list price according to Redfin (RDFN)?

Rochester, NY had the highest share of homes sold above their final list price at 66.2%.