SEATTLE — Homebuyers locked in nearly 70% more mortgages than they did a month earlier on September 23, according to a new report from the real estate brokerage Redfin.
The surge in mortgage-rate locks comes five days after the Fed cut interest rates for the first time in four years. It’s worth noting that the surge in mortgage-rate locks may overstate the increase in mortgage demand, as it could be exacerbated by buyers who had already decided to purchase a home but were waiting to lock in a rate until after the Fed meeting.
Still, there are other indicators that demand is improving. Mortgage-purchase applications are up more than 10% month over month. Additionally, Redfin’s Homebuyer Demand Index – a measure of tours and other buying services from Redfin agents–shot up to its highest level since May during the week ending September 22. It’s also notable that the Demand Index rose 1% annually, the first increase in nearly a year.
Pending U.S. home sales fell 3.1% during the four weeks ending September 22, but that’s the smallest decline in five weeks, and the increases in mortgage-rate locks and mortgage applications will likely lead to an uptick in sales over the next few weeks.
News of the Fed’s historic interest-rate cut is the main factor bringing home buyers off the sidelines. Mortgage rates and housing costs had been declining meaningfully for several weeks before the rate cut, but before this week it hadn’t led to an uptick in demand.
Many house hunters had been waiting for the rate cut to happen to get serious about buying, and now they have, even though mortgage rates didn’t fall further after the rate cut than they had in the week leading up to it.
Improving affordability is also, of course, a major factor bringing buyers back. The median monthly housing payment is down 4.4% year over year, the biggest decline in more than four years. It has dropped to its lowest level since January (with the exception of the prior 4- week period), thanks to mortgage rates dropping to their lowest level since February 2023 last week. (Home prices are still increasing nationwide, rising 3.9% year over year.)
“One new client decided to start their home search last Thursday because of the Fed’s rate cuts on Wednesday,” said Andrew Vallejo, a Redfin Premier agent in Austin, TX. “They immediately reached out to a real estate agent and they’re working with a lender. Rate cuts have sparked more showings; we’re seeing all of our listings in the area get more traffic. It’s a nice glimmer of hope after a slow year in Austin.”
Declining mortgage rates and the Fed’s rate cut are also leading to fresh supply. New listings of homes for sale are up 7.6% year over year, the biggest increase since June, with sellers realizing it’s unlikely mortgage rates will drop back down to the 3% or 4% range anytime soon. It’s worth noting another reason for annual uptick in new listings is that they were quite low at this time last year.
Source: Redfin
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