WASHINGTON — Pending U.S. home sales rose 3.5% year over year during the four weeks ending October 20, the biggest increase in three years (with the exception of the prior 4-week period, when they rose 3.7%). On a local level, pending sales are up in 35 of the 50 most populous U.S. metros, the most in three years.
Demand is also holding up at earlier stages of the homebuying process. Redfin’s Homebuyer Demand Index – a measure of tours and other buying services from Redfin agents – hit its highest level since May, and is up 3% year over year.
Redfin economists say pending sales and home tours are performing surprisingly well in the face of high housing costs and uncertainty surrounding the upcoming election. Chen Zhao, Redfin’s economic research lead, said she would expect a bigger dropoff in homebuying demand given how much mortgage rates have increased in the last few weeks. The weekly average mortgage rate is 6.44%, up from a two-year low of 6.08% at the end of September, and the daily average is 6.92%, its highest level since July.
Election uncertainty, stronger-than-expected economy are pushing mortgage rates up
Mortgage rates are jumping because investors’ expectations of the impending election are shifting, and because the most recent jobs and inflation reports showed the economy is a bit stronger than expected.
“Investors in the bond market are particularly worried about the possibility of increased government debt after the election,” Zhao said. “They’re concerned that one party could end up controlling both the White House and Congress, which would increase government spending more. That concern, along with strong economic data, is pushing up 10-year treasury yields and mortgage rates.”
High mortgage rates have pushed monthly housing payments near their highest level since July.
Rising rates and stubbornly high home prices have pushed the median U.S. monthly housing payment to $2,587, the highest level since July (except the prior 4-week period, when the median payment was $2,591). Cash buyers may be propping up home sales: Mortgage-purchase applications fell 5% in the last week, dropping near their lowest level in a year, even as pending sales and early-stage demand hold up.
On the selling side, new listings of homes for sale are up 2.2% annually, one of the smallest increases in a year.
“There are buyers out there, especially for homes in desirable locations with highly rated schools and counties with lower taxes,” said Shari Mosteller, a Redfin Premier agent in Atlanta. “But more buyers are negotiating on price, asking for concessions and money toward closing costs. On my listings, I’m seeing a trend of buyers asking for minor repairs and/or cosmetic items. Many are getting creative with different types of mortgages, opting for an adjustable rate or a shorter loan period. That said, a fair amount of folks, both buyers and sellers, are waiting on the sidelines until after the election because they feel a lot of uncertainty in the housing market.”
Source: Redfin
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