Listing consults with Redfin agents have risen significantly since rates began to fall last month. Our economists expect buyers will take advantage of lower rates and more listings in the new year, after the typical holiday slowdown.
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.
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 their 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:
Refer to our metrics definition page for explanations of all the metrics used in this report.
