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A recent half-point drop in mortgage rates could be drawing some buyers back to the market, according to a new report released Thursday by the online brokerage Redfin.
The report found that Redfin’s Homebuyer Demand Index — which takes into account requests for home tours and other homebuying services — had increased 15 points since June 15, reversing 10 straight weeks of decreasing demand that started in mid-April.
Daryl Fairweather | Redfin
“The housing market seems to be settling into an equilibrium now that demand has leveled off,” Redfin Chief Economist Daryl Fairweather said in a statement. “We may still be in for some surprises when it comes to inflation and rate hikes from the Fed, but for now an ease in mortgage rates has brought some relief to buyers who were reeling from last month’s rate spike. Although the number of sales is down considerably from last year, first time-homebuyers with not a lot of cash are welcoming the decline in competition, and anyone who intends to stay in their home for many years doesn’t need to worry about these short-term fluctuations in home prices.”
Google searches for homes for sale have also risen 11 percent since May and home tours have remained relatively stable in recent weeks, the report found.
The uptick in homebuyer interest hasn’t yet translated to increases in home purchases or contract signings, according to the report. It noted that pending home sales and home sale prices continue to decline, few homes are being listed and inventory continues to tick up.
Mortgage rates ticked lower on Friday, falling from 5.22 on Thursday to 5.13 percent on the heels of a negative GDP report stoking fears of an impending recession and the latest interest rates hike by the federal reserve.
Interest rates were increased in July by 75 basis points — the same amount they were in June instead of a more aggressive hike to combat out-of-control inflation, a move that some hope could take pressure off mortgage rates.
Homebuyers could benefit from further recession fears if they cause mortgage rates to drop further, the report noted.
Taylor Marr | Redfin
“Whether we label the current economy a recession doesn’t matter much except for sentiment,” Redfin Deputy Economist Taylor Marr said in a statement. “The under-the-hood stats—on consumption, real income and inflation—significantly worsened last quarter. The upside is that mortgage rates fall when the potential for economic growth is weak. This could help bring more rate-sensitive homebuyers off the fence to move forward with a purchase.”
