Redfin Reports Mortgage Rates Dip Below 7% For First Time in 5 Weeks, Giving Buyers Some Much-Needed Relief

Rhea-AI Summary

Redfin reports that mortgage rates have dipped below 7% for the first time in over five weeks, offering some relief to buyers. Pending home sales fell 4.3% year-over-year for the four weeks ending May 12, marking the most significant decline in three months, while new listings remained flat week-over-week. The median U.S. home-sale price increased by 4.7% year-over-year to a record $386,951, with median monthly mortgage payments at $2,858. Affordability is improving slightly as 6.3% of home sellers drop their prices, the highest in 18 months. Leading indicators show reduced homebuying demand and activity, including a 2% decline in mortgage-purchase applications and a 13% drop in the Redfin Homebuyer Demand Index. Touring activity has increased by 5% since the start of the year, but Google searches for 'home for sale' are down 8% from a month earlier.

Positive

• Mortgage rates have dipped below 7% for the first time in over five weeks.
• Median U.S. home-sale price increased by 4.7% year-over-year to a record $386,951.
• New listings rose 10% year-over-year.
• 6.3% of home sellers are dropping their prices, which could slow down price growth.
• Touring activity is up by 5% since the start of the year.

Negative

• Pending home sales fell 4.3% year-over-year for the four weeks ending May 12.
• Median monthly mortgage payments are just $26 shy of the all-time high at $2,858.
• Homebuying demand and activity are down, with a 2% decline in mortgage-purchase applications.
• Redfin Homebuyer Demand Index dropped by 13%.
• Google searches for 'home for sale' are down 8% from a month earlier.

Insights

Financial Analyst

The dip in mortgage rates below 7% could provide a slight relief to potential homebuyers who have been grappling with high mortgage payments. This change comes after a softer-than-expected inflation report, reflecting a potential easing in economic pressures. However, the housing market still faces significant challenges. Pending home sales fell by 4.3% year-over-year, hitting their lowest point in three months. This suggests that despite the dip in rates, buyer demand remains subdued, possibly due to sustained high prices and economic uncertainty.

The median home-sale price has increased by 4.7% year-over-year to $386,951, setting a new record. This increase, coupled with high mortgage payments averaging $2,858, indicates that affordability continues to be a critical concern. While some sellers are reducing prices, with 6.3% of homes experiencing price drops, the overall market remains tilted towards high costs.

For investors, this situation presents a mixed bag. On one hand, lower mortgage rates might gradually increase buyer activity, potentially stabilizing the market. On the other hand, the decline in pending home sales and high median prices suggest lingering headwinds. Short-term, we might see minor improvements in buyer sentiment, but long-term recovery would depend on broader economic factors, including inflation and wage growth.

Market Research Analyst

The current dynamics in the housing market underscore a significant shift from typical seasonal trends. Traditionally, new listings and pending home sales rise during this time of the year; however, new listings have remained flat and pending sales have declined. This anomaly could be attributed to homeowners choosing to hold onto their properties due to previously secured lower mortgage rates, reducing inventory and keeping prices elevated.

The high median home-sale price and near-record mortgage payments indicate that affordability issues are still prevalent. Yet, the fact that 6.3% of sellers are dropping prices suggests that there might be some price stabilization on the horizon. For potential buyers, this could mean more negotiation power in a market that has been heavily biased towards sellers.

It's worth noting the geographical disparities in market performance. Areas like Detroit and Anaheim have seen substantial increases in median sale prices, while San Antonio is one of the few metros experiencing a decline. This variation highlights the importance of localized market conditions and suggests that investors should consider regional trends when making investment decisions.

Economist

The recent decline in mortgage rates below 7% is a critical development amidst sustained high housing costs. This change follows a slightly softer inflation report, indicating possible easing in Federal Reserve policies. The housing market's broader indicators, such as the 4.3% decline in pending home sales and flat new listings, reflect ongoing hesitancy among both buyers and sellers.

The mixed signals in the market, including high median prices and increased price drops, imply a complex interplay between affordability and demand. The median monthly mortgage payment nearing an all-time high underscores the financial strain on buyers, despite recent rate dips. For investors, the key takeaway is the potential for a gradual market adjustment, influenced by broader economic factors such as inflation trends and monetary policy.

In the short term, we might see a slight uptick in buying activity due to the lower rates. However, long-term market health will depend on broader economic stability and efforts to improve housing affordability. Investors should remain cautious, focusing on macroeconomic indicators and regional disparities to inform their investment strategies.

Pending home sales are down and new listings are flat during a time of year when they typically rise. But this week’s softer-than-expected inflation report sent mortgage rates down, which could bring back some homebuyers and sellers.

SEATTLE--(BUSINESS WIRE)-- (NASDAQ: RDFN) —Pending home sales fell 4.3% from a year earlier during the four weeks ending May 12, the biggest decline in roughly three months. That’s according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage. Pending home sales also posted a week-over-week decline, unusual for early May.

Inventory is losing momentum, too, as would-be sellers stay put to hang onto their low mortgage rate. New listings rose 10% year over year, but they were essentially flat from a week earlier, which is significant because listings typically increase this time of year.

The housing market slumped because of sky-high housing costs. The median U.S. home-sale price is up 4.7% year over year to a record $386,951, and the median monthly mortgage payment is sitting at $2,858, just $26 shy of the all-time high set in April. But affordability is starting to improve a bit: Daily average mortgage rates have steadily declined since the start of May, and this week’s slightly softer-than-expected inflation report sent rates below 7% for the first time in over five weeks. And 6.3% of home sellers are dropping their price, on average, the highest share in a year and a half, which may mean price growth loses momentum soon.

“High prices and rates are challenging, but there are ways for buyers to take advantage of the somewhat slow market,” said Marsha McMahon-Jones, a Redfin Premier agent in Palm Springs, CA. “Sellers know that high mortgage rates mean they should expect negotiations, expect offers to come in under list price, and be ready for some back and forth on things like repairs and closing costs. Buyers may not be able to get a lower mortgage rate, but they’re often getting homes for slightly less than the asking price. It’s also a good time to buy a fixer-upper at a lower price point because those aren’t selling as quickly.”

For Redfin economists’ takes on the housing market, including more on how current financial events are impacting mortgage rates, please visit Redfin’s “From Our Economists” page.

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	6.99% (May 15)	Down from a 5-month high of 7.52% three weeks earlier	Up from 6.55%	Mortgage News Daily
Weekly average 30-year fixed mortgage rate	7.09% (week ending May 9)	Down from 5-month high of 7.22% a week earlier	Up from 6.35%	Freddie Mac
Mortgage-purchase applications (seasonally adjusted)		Declined 2% from a week earlier (as of week ending May 10)	Down 14%	Mortgage Bankers Association
Redfin Homebuyer Demand Index (seasonally adjusted)		Lowest level in 2 months (as of week ending May 12)	Down 13%	Redfin Homebuyer Demand Index, a measure of requests for tours and other homebuying services from Redfin agents
Touring activity		Up 5% from the start of the year (as of May 13)	At this time last year, it was up 21% from the start of 2023	ShowingTime, a home touring technology company
Google searches for “home for sale”		Down 8% from a month earlier (as of May 13)	Down 15%	Google Trends

Key housing-market data

U.S. highlights: Four weeks ending May 12, 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 May 12, 2024	Year-over-year change	Notes
Median sale price	$386,951	4.7%	All-time high
Median asking price	$418,455	6.6%	All-time high
Median monthly mortgage payment	$2,858 at a 7.09% mortgage rate	12.7%	Just $26 below all-time high set during the 4 weeks ending April 28
Pending sales	90,457	-4.3%	Biggest decline since 4 weeks ending Feb. 25
New listings	102,269	10%
Active listings	890,224	14.2%
Months of supply	3.2	+0.5 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	45.2%	Down from 49%
Median days on market	33	+2 days
Share of homes sold above list price	30.8%	Down from 33%
Share of homes with a price drop	6.3%	+2 pts.	Highest level since Nov. 2022
Average sale-to-list price ratio	99.4%	Unchanged

Metro-level highlights: Four weeks ending May 12, 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	Detroit (18.8%) Anaheim, CA (18.6%) West Palm Beach, FL (16.2%) San Jose, CA (13.6%) Newark, NJ (11.7%)	San Antonio (-0.5%)	Declined in just 1 metro
Pending sales	San Jose, CA (16.6%) Anaheim, CA (9.2%) San Francisco (5.3%) Newark, NJ (5.2%) Sacramento, CA (3%)	Phoenix (-14.9%) Atlanta (-13.6%) Houston (-13.2%) West Palm Beach, FL (-11.8%) Nashville, TN (-11.1%)	Increased in 15 metros
New listings	San Jose, CA (40.2%) Seattle (26.4%) Phoenix (24.7%) Oakland, CA (24.6%) Montgomery County, PA (21.9%)	Chicago (-8.1%) Atlanta (-3.4%) Detroit (-3.1%) Virginia Beach, VA (-1.9%) Newark, NJ (-1.6%) Warren, MI (-1.1%)	Declined in 6 metros

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

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 run the country's #1 real estate brokerage site. Our customers can save thousands in fees while working with a top agent. Our home-buying customers see homes first with on-demand tours, and our lending and title services help them close quickly. Customers selling a home can have our renovations crew fix it up to sell for top dollar. Our rentals business empowers millions nationwide to find apartments and houses for rent. Since launching in 2006, we've saved customers more than $1.6 billion in commissions. We serve more than 100 markets across the U.S. and Canada and employ over 4,000 people.

Redfin’s subsidiaries and affiliated brands include: Bay Equity Home Loans^®, Rent.™, Apartment Guide^®, Title Forward^® and WalkScore^®.

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/20240516365280/en/

Redfin Journalist Services:

Kenneth Applewhaite, 206-414-8880

press@redfin.com

Source: Redfin

FAQ

What is the current mortgage rate reported by Redfin?

The current mortgage rate has dipped below 7% for the first time in over five weeks.

How much did pending home sales fall according to Redfin?

Pending home sales fell 4.3% year-over-year for the four weeks ending May 12.

What is the median U.S. home-sale price reported by Redfin?

The median U.S. home-sale price is $386,951, a 4.7% increase year-over-year.

What is the status of new home listings according to Redfin?

New home listings rose 10% year-over-year but remained flat week-over-week.

How has the Redfin Homebuyer Demand Index changed?

The Redfin Homebuyer Demand Index has dropped by 13%.