Redfin Reports Home Prices and Mortgage Rates Rise, Pushing Would-Be Buyers to the Sidelines

Rhea-AI Summary

Home prices surged with a 6.1% increase year over year, marking the highest rise in 15 months. Mortgage rates climbed above 7%, impacting homebuyers and sellers. Pending home sales dropped by 7.3%, influenced by various factors like high costs and seasonal events. Redfin predicts a potential increase in activity in the spring as mortgage rates may decline.

Insights

Economist

The recent surge in home prices, coupled with a rise in mortgage rates above 7%, has significant implications for the housing market and broader economy. The 6.1% year-over-year increase in median home-sale prices indicates a robust demand for housing despite the higher costs of borrowing. This could be reflective of a constrained supply in the housing market, which tends to push prices upward.

However, the decline in pending home sales and the Redfin Homebuyer Demand Index suggests a cooling effect as potential buyers may be deterred by the increased cost of financing a home purchase. This dichotomy between rising prices and slowing sales volume could signal a shift towards a buyer's market, where buyers have more negotiating power due to decreased competition. The increase in new listings may provide some relief to inventory shortages, but it remains to be seen if this will translate into increased sales or if high mortgage rates will continue to limit buyer activity.

From an economic standpoint, persistent high mortgage rates can dampen consumer spending as homeowners allocate more of their income to housing expenses. Additionally, if mortgage rates remain elevated, there could be downstream effects on the construction industry and related sectors. The anticipation of potential rate cuts by the Federal Reserve later in the year could provide some optimism for a resurgence in buyer demand, but this is contingent upon the trajectory of inflation and the Fed's policy response.

Real Estate Market Analyst

The real estate market is experiencing a period of volatility as indicated by the conflicting trends of rising home prices and declining homebuyer demand. The 6.1% increase in home-sale prices is a significant data point, as it represents the largest annual increase in 15 months. It is essential to monitor whether this trend is a result of a genuine increase in home values or merely a reflection of a low supply of available homes.

The decline in the Redfin Homebuyer Demand Index by 18% is a concerning metric that reflects the sensitivity of potential homebuyers to mortgage rate fluctuations. The current rates above 7% are likely to have a cooling effect on the market, as evidenced by the 7.3% decrease in pending home sales. This suggests that the housing market's momentum is slowing down, which could lead to a stabilization or even a decrease in home prices if the trend continues.

Furthermore, the seasonal factors mentioned, such as extreme weather events and major social occasions, typically have short-term effects on homebuying patterns. However, their coincidence with the broader trend of high mortgage rates could exacerbate the market's sluggishness. Real estate professionals and potential sellers may need to adjust their expectations and strategies in response to these market conditions.

Financial Analyst

For investors and stakeholders in the real estate and financial sectors, the dynamics of the housing market are critical. The rise in home prices juxtaposed with the increase in mortgage rates presents a complex investment landscape. The elevated mortgage rates above the 7% threshold can pressure financial institutions' mortgage lending operations, potentially leading to tighter credit conditions or increased interest income, depending on the banks' risk management strategies.

The reported decrease in homebuyer demand could signal a forthcoming plateau or drop in real estate prices, impacting real estate investment trusts (REITs), homebuilders and other related equities. Investors should closely monitor the Federal Reserve's interest rate decisions as these will have direct consequences on mortgage rates and, by extension, the real estate market's performance. It is also worth noting that the housing market is a key economic indicator, often predictive of broader economic trends, so these developments could have ripple effects across various market sectors.

While the report suggests a potential pickup in activity during the spring, the uncertainty surrounding inflation and interest rate policies could introduce volatility in the markets. Investors would benefit from a diversified portfolio strategy to mitigate risks associated with any single sector, including real estate.

Home prices posted their biggest annual increase in 15 months and mortgage rates rose above 7% this week.

SEATTLE--(BUSINESS WIRE)-- (NASDAQ: RDFN) —The median U.S. home-sale price rose 6.1% year over year during the four weeks ending February 11, the biggest increase since October 2022. That’s according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage.

Mortgage rates are rising, too, exacerbating high prices to drive costs up: Daily average rates are sitting above 7%, up from 6.6% at the beginning of the month.

High costs are one factor keeping would-be homebuyers on the sidelines. Pending home sales are down 7.3% year over year, one of the biggest declines in over four months, and Redfin’s Homebuyer Demand Index–a seasonally adjusted measure of requests for tours and other homebuying services from Redfin agents–is down 18%. In addition to high housing costs, several seasonal factors kept some house hunters at home this past week: extreme storms in Southern California, the Lunar New Year and the Super Bowl (none of which are accounted for in the demand index’s seasonal adjustment). Sellers are a bit more active than buyers, with new listings up 8% year over year as some homeowners hope to take advantage of rising prices.

“The Super Bowl is like Groundhog Day for real estate economists; we usually have a read on how the market is shaping up by the beginning of February, and the read this year is that it’s looking sluggish so far, mostly because of stubbornly high mortgage rates,” said Redfin Economic Research Lead Chen Zhao. “This week’s hotter-than-expected inflation report confirms that the Fed is unlikely to cut interest rates next month, which means mortgage rates will stay near 7% for now. Activity should pick up a bit in the spring, partly because it’ll be selling season and partly because people are getting more and more accustomed to elevated rates. We expect mortgage rates to start declining later in the spring as inflation eases and the Fed finally starts cutting interest rates.”

Christine Kooiker, a Redfin Premier agent in Grand Rapids, MI, said she’s encouraging homeowners who are thinking about selling to list soon.

“A lot of sellers want to wait until spring, but I’m telling people to consider listing in the next few weeks because even though demand is fairly slow, there’s hardly anything else on the market,” Kooiker said. “Buyers may want to act sooner rather than later, too, because prices will continue to go up. I have a few clients who waited to make an offer, or made an offer that was too low, and now they regret it because a house they love got snatched up.”

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	7.09% (Feb. 14)	Up from 6.75% a week earlier	Up from 6.54%	Mortgage News Daily
Weekly average 30-year fixed mortgage rate	6.64% (week ending Feb. 8)	Near lowest level since May	Up from 6.12%	Freddie Mac
Mortgage-purchase applications (seasonally adjusted)		Down 3% from a week earlier; up 1% from a month earlier (as of week ending Feb. 9)	Down 12%	Mortgage Bankers Association
Redfin Homebuyer Demand Index (seasonally adjusted)		Down about 6% from a week earlier (as of week ending Feb. 11)	Down 18%	Redfin Homebuyer Demand Index, a measure of requests for tours and other homebuying services from Redfin agents
Google searches for “home for sale”		Essentially unchanged from a month earlier (as of Feb. 10)	Down 11%	Google Trends
Touring activity		Up 14% from the start of the year (as of Feb. 12)	At this time last year, it was up 10% from the start of 2023	ShowingTime, a home touring technology company

Key housing-market data

U.S. highlights: Four weeks ending February 11, 2024 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 February 11, 2024	Year-over-year change	Notes
Median sale price	$362,725	6.1%	Biggest increase since Oct. 2022
Median asking price	$395,850	6.3%
Median monthly mortgage payment	$2,608 at a 6.64% mortgage rate	9.1%	Down roughly $110 from all-time high set in October 2023, but up roughly $250 from the four weeks ending Dec. 31
Pending sales	72,221	-7.3%	Biggest decline since October 2023 (with the exception of the prior 4-week period, when there was a 7.4% decline)
New listings	73,214	8%
Active listings	751,411	-2.5%
Months of supply	4.2 months	+0.1 pt.	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	35.3%	Up from 34%
Median days on market	50	-2 days
Share of homes sold above list price	22.5%	Up from 20%
Share of homes with a price drop	5.6%	+1.1 pts.
Average sale-to-list price ratio	98.2%	+0.5 pts.

Metro-level highlights: Four weeks ending February 11, 2024 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	Newark, NJ (14%) New Brunswick, NJ (13.8%) Miami (13.2%) Anaheim, CA (12.8%) Warren, MI (12%)	San Antonio, TX (-5.2%) Austin, TX (-1.4%) Fort Worth, TX (-0.7%)	Declined in 3 metros
Pending sales	San Jose, CA (9%) Cleveland, OH (2%) San Francisco (1.9%)	Portland, OR (-31.3%) San Antonio, TX (-28.4%) Warren, MI (-24.2%) Nashville, TN (-21.8%) New Brunswick, TN (-20.1%)	Increased in 3 metros
New listings	Dallas, TX (28.6%) Jacksonville, FL (28.4%) Fort Lauderdale, FL (26.7%) Miami (25.6%) Tampa, FL (19.6%)	Milwaukee, WI (-13.5%) Atlanta (-13.3%) Chicago (-11.9%) Portland, OR (- 11.7%) Nashville, TN (-7.4%)	Declined in 12 metros

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

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/20240215285954/en/

Redfin Journalist Services:

Ally Braun, 206-414-8880

press@redfin.com

Source: Redfin

FAQ

What was the year-over-year increase in median U.S. home-sale price?

The median U.S. home-sale price rose by 6.1% year over year.

What are the current average mortgage rates?

Daily average mortgage rates are above 7%, up from 6.6% at the beginning of the month.

Why are pending home sales down?

Pending home sales are down 7.3% year over year due to factors like high housing costs and seasonal events.

What is Redfin's prediction for mortgage rates in the upcoming months?

Redfin expects mortgage rates to start declining later in the spring as inflation eases and the Fed potentially cuts interest rates.