Redfin Reports Declining Mortgage Rates Lure Sellers Off Sidelines, Paving the Way For 2024 Buyers

Rhea-AI Summary

Redfin (NASDAQ: RDFN) reports significant rise in listing consults and new listings, with falling mortgage rates and increased housing starts hinting at a thawing housing market.

Insights

Financial Analyst

The recent decline in mortgage rates and the corresponding rise in listing consults and housing starts indicate a potential resurgence in the housing market. This development could have implications for real estate companies, mortgage lenders and the broader economy. The drop in mortgage payments, from a peak in October to now, suggests increased affordability for potential homebuyers, likely leading to a rise in demand for housing as indicated by the 9% year-over-year increase in new listings.

However, the actual conversion of this increased interest into sales remains to be seen, given the current decline in pending home sales. The market's response to the Federal Reserve's interest rate policies will be critical. If rates remain stable or decline further, we could see a sustained recovery in the housing market. Conversely, any indication of rate increases could dampen this optimism and lead to a contraction in demand.

Economist

The report highlights a softening of the housing market, which could be an early indicator of economic stabilization. The Federal Reserve's recent shift in tone, implying the possibility of rate cuts, appears to have directly influenced mortgage rates and market activity. This shift, combined with the seasonal increase in activity post-holidays, suggests a potential increase in consumer spending and economic growth.

It is important to note that while mortgage-purchase applications have increased, the actual home sales have not yet shown a significant uptick. This discrepancy may reflect a lag between buyer interest and market transactions, or it could point to underlying economic caution among consumers. Additionally, the increase in housing starts is a positive sign for construction and related industries, potentially leading to job growth and increased economic activity in the short-term.

Real Estate Industry Analyst

The data provided by Redfin is indicative of a shift in the real estate market dynamics. The increase in listing consults and new listings suggests that sellers are becoming more active, potentially leading to a more balanced market. This could benefit real estate companies like Redfin, which rely on transaction volumes for revenue.

The impact of the holiday season on the housing market is a well-documented trend, with activity typically slowing down. Yet, the reported surge in buyer interest and mortgage applications indicates that the market could rebound more robustly than usual post-holiday season. Real estate agents and brokers may need to adjust their strategies to capitalize on this changing market sentiment. Moreover, the long-term implications for the housing market will depend on the Federal Reserve's monetary policy and its effects on consumer confidence and purchasing power.

Listing consults with Redfin agents have risen significantly since rates began to fall last month

SEATTLE--(BUSINESS WIRE)-- (NASDAQ: RDFN) —This week’s falling mortgage rates, sizable year-over-year increases in both new listings and listing consults with Redfin agents, and surge in housing starts all suggest that 2023’s frozen housing market is thawing. Sales are likely to climb after the typical holiday lull. That’s all according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage.

Monthly mortgage payments are dropping. Daily average mortgage rates dropped to 6.64% this week, their lowest level since May and down from a two-decade high of 8% in late October. The median U.S. monthly mortgage payment was $2,472 during the four weeks ending December 17, down $264 from the October peak, but up 11% year over year. Rates declined quickly last week because the Fed shifted its tone, signaling more interest-rate cuts sooner than expected as the latest data points to a soft landing for the economy.

There are more homes to choose from. Redfin has seen a double-digit annual increase this week in homeowners contacting its real estate agents for help selling homes, and new listings are up 9% from a year ago—the biggest annual increase since July 2021. The uptick is partly due to falling rates, with homeowners feeling less locked in by rates in the 3% to 4% range.

Mortgage applications are up from their low point, but home sales are still falling. Mortgage-purchase applications are up 18% from their early-November low point. But that early-stage demand hasn’t yet translated into homebuying contracts: Pending home sales are down 7% year over year, similar to declines we’ve seen over the last few months, but it’s worth noting that the holidays are typically a slow season for the housing market. “The last week of economic news and data makes it more likely than not that mortgage rates have peaked,” said Redfin Economic Research Lead Chen Zhao. “Buyers will return from the holidays with more homes to choose from, and they should still see rates in the mid-6% range. But because the Fed is erring on the side of caution, there’s still a chance that rates could go back up.”

Anecdotally, dropping rates are piquing buyers’ interest. Although sales aren’t yet improving, Redfin agents and mortgage brokers are reporting that buyers are starting to act on lower rates:

• “I’m seeing an uptick in applications, an uptick in clients who had disappeared reaching back out, and an uptick in refinances.” —Mona Edick, manager at Bay Equity Home Loans, a Redfin company
• “The recent dip in rates is bringing optimism to buyers, but that’s up against a normal seasonal slowdown here in the New England market. One example of the impact of falling rates: I just put a small condo that was originally listed in early November back on the market. It attracted much more attention this time, and my seller just accepted an offer.” —Scott Driscoll, Redfin Premier agent in the Boston area
• “Buyers are excited about falling rates. Inventory in Seattle is still low right now–and not due to increase until the new year–so there’s not much for buyers to tour right now, but they’re raring to go.” —Shoshana Godwin, Redfin Premier agent in Seattle

Leading indicators

Indicators of homebuying demand and activity
	Value (if applicable)	Recent change	Year-over-year change	Source
Daily average 30-year fixed mortgage rate	6.64% (Dec. 20)	Lowest level since May	Up from 6.31%	Mortgage News Daily
Weekly average 30-year fixed mortgage rate	6.95% (week ending Dec. 14)	Lowest level since August. Down from two-decade high of 7.79% two months earlier	Up from 6.33%	Freddie Mac
Mortgage-purchase applications (seasonally adjusted)		Down 1% from a week earlier (as of week ending Dec. 15)	Down 18%	Mortgage Bankers Association
Redfin Homebuyer Demand Index (seasonally adjusted)		Up 5% from a month earlier (as of the week ending Dec. 17)	Down 7%	Redfin Homebuyer Demand Index, a measure of requests for tours and other homebuying services from Redfin agents
Google searches for “home for sale”		Down 7% from a month earlier (as of Dec. 16)	Essentially unchanged	Google Trends
Touring activity		Down 38% from the start of the year (as of Dec. 14)	At this time last year, it was down 45% from the start of 2022	ShowingTime, a home touring technology company

Key housing-market data

U.S. highlights: Four weeks ending December 17, 2023 Redfin’s national metrics include data from 400+ U.S. metro areas, and is based on homes listed and/or sold during the period. Weekly housing-market data goes back through 2015. Subject to revision.
	Four weeks ending December 17, 2023	Year-over-year change	Notes
Median sale price	$363,628	4.2%	Biggest increase since Oct. 2022. Prices are up partly because rapidly rising mortgage rates were hampering prices during this time last year.
Median asking price	$366,019	5.5%
Median monthly mortgage payment	$2,472 at a 6.95% mortgage rate	11.4%	Down $264 (-10%) from all-time high set during the four weeks ending Oct. 22. Lowest level since April.
Pending sales	56,405	-7%
New listings	53,936	9.4%	Biggest uptick since July 2021. The increase is partly because new listings were falling at this time last year.
Active listings	830,914	-4.5%	Smallest decline since June
Months of supply	4 months	+0.2 pts.	4 to 5 months of supply is considered balanced, with a lower number indicating seller’s market conditions
Share of homes off market in two weeks	28.5%	Up from 26%
Median days on market	38	-2 days
Share of homes sold above list price	25.6%	Up from 24%
Share of homes with a price drop	5.1%	+0.7 pts.
Average sale-to-list price ratio	98.6%	+0.5 pts.

Metro-level highlights: Four weeks ending December 17, 2023 Redfin’s metro-level data includes the 50 most populous U.S. metros. Select metros may be excluded from time to time to ensure data accuracy.
	Metros with biggest year-over-year increases	Metros with biggest year-over-year decreases	Notes
Median sale price	Anaheim, CA (16.1%) Newark, NJ (15%) Fort Lauderdale, FL (12.5%) Miami (11.8%) Nassau County, NY (11%)	Austin, TX (-4.5%) San Antonio, TX (-3%) Houston (-1.2%) Fort Worth, TX (-0.2%)	Declined in 4 metros
Pending sales	Milwaukee (5.8%) Philadelphia (5.1%) Dallas (2.5%) Austin, TX (2.2%) Detroit (1.7%)	Providence, RI (-17.6%) Jacksonville, FL (-17.4%) Newark, NJ (-14.4%) New Brunswick, NJ (-12.4%) Oakland, CA (-12.2%)	Increased in 8 metros
New listings	Phoenix (25.3%) Orlando, FL (23.1%) Miami (21.4%) San Antonio, TX (20%) Montgomery County, PA (17.3%)	San Francisco (-28.6%) Atlanta (-13.9%) Indianapolis, IN (-11.1%) Virginia Beach, VA (-5.4%) Oakland, CA (-5.1%)	Declined in 11 metros

To view the full report, including charts, please visit:
https://www.redfin.com/news/housing-market-update-declining-mortgage-rates-increase-new-listings

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/20231221484271/en/

Redfin Journalist Services:

Kenneth Applewhaite, 206-414-8880

press@redfin.com

Source: Redfin

FAQ

What is the impact of falling mortgage rates on Redfin (RDFN)?

Falling mortgage rates have led to a significant increase in listing consults and new listings for Redfin.

What is the current daily average mortgage rate?

The current daily average mortgage rate is 6.64%.

How much has the median U.S. monthly mortgage payment decreased by?

The median U.S. monthly mortgage payment has decreased by $264 from the October peak, but is up 11% year over year.

What is the percentage increase in new listings compared to last year?

New listings are up 9% from a year ago, marking the biggest annual increase since July 2021.

How much have mortgage-purchase applications increased by?

Mortgage-purchase applications are up 18% from their early-November low point.

What is the current trend in pending home sales?

Pending home sales are down 7% year over year, similar to declines seen over the last few months.

What is the outlook for mortgage rates according to Redfin's Economic Research Lead?

Redfin's Economic Research Lead believes that buyers will return from the holidays with more homes to choose from, still seeing rates in the mid-6% range, but there's a chance that rates could go back up due to the Fed's cautious approach.

How are buyers responding to the dropping rates?

Buyers are showing interest in lower rates, leading to an uptick in applications, clients reaching back out, and an increase in refinances according to Redfin agents and mortgage brokers.