Redfin’s Homebuyer Demand Index, which measures requests for home tours and other services from Redfin agents, is ticking up as the spring home-selling season draws nearer. That hasn’t yet converted to a meaningful improvement in pending sales–but Redfin agents expect it will in the next few months.
Some house hunters are dipping their toes back into the market after harsh winter weather froze them out at the start of January. Redfin’s Homebuyer Demand Index–a measure of requests for tours and other buying services from Redfin agents–rose 6% from a week earlier during the week ending January 28, and a separate measure of showings also signals they’ve ticked up over the last week.
More buyers are touring homes because mortgage rates are holding steady below 7%, down from 8% this past October, and some buyers are worried prices will increase more if they wait longer. Sale prices rose 5.5% year over year during the four weeks ending January 28, the biggest increase in over a year.
But that earliest-stage demand hasn’t yet translated into home sales. Mortgage-purchase applications declined from a week earlier and pending sales posted their biggest year-over-year decline in four months, likely reflecting tepid early-stage demand during the middle of January. Home tours and other actions buyers typically take before applying for a mortgage was lower than expected in mid-January as daily average mortgage rates inched up from their December low point and severe weather kept many would-be buyers at home.
Redfin agents expect the increase in tours to convert into an improvement in pending sales over the next few months. That’s partly because of typical seasonality: Home listings and sales usually pick up as spring approaches.
“I thought declining mortgage rates and more inventory would cause the market to take off right at the start of the new year. But even though demand has picked up some, I’m not wowed,” said Hal Bennett, a Redfin Premier agent in the Seattle area. “Now I believe this year’s market will launch in the spring, once 6% rates are even more entrenched in buyers’ psyches and more homeowners list their houses.”
This week’s economic news suggests that mortgage rates are unlikely to meaningfully fall in the next few months. At its press conference on January 31, the Fed signaled they’re unlikely to cut interest rates in March, which will probably keep mortgage rates elevated near their current level into the spring, though Redfin economists still expect them to gradually decline by the end of the year.
Refer to our metrics definition page for explanations of all the metrics used in this report.
