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A sudden bump in interest rates and bitter winter weather has sent homebuyers back to the sidelines, according to a new Redfin report published on Thursday.
Chen Zhao | Credit: Redfin
“We’re seeing a bit of recovery with house hunters touring homes, but even demand at the earliest stages isn’t up as much as we would expect at this time of year,” Redfin economic search lead Chen Zhao said in a prepared statement on Thursday. “That’s because mortgage rates are climbing again and winter weather has been harsher than usual in much of the country, keeping some house hunters at home.”
While a large swath of homesellers and homebuyers have come to accept higher mortgage rates, a record one-day rise in daily average rates sent a chill up consumers’ spines.
On Feb. 2, an unexpectedly strong jobs report jolted rates to 6.96 percent — a 180 from Feb. 1 and Jan. 31, when rates experienced the biggest drop in more than a month.
The boost in rates pushed the typical mortgage payment $100 shy of October’s all-time high of $2,739. Heightened borrowing costs matched with a 5.4 percent annual increase in median sales prices have led pending sales to experience their biggest decrease (8 percent) since October.
Of the 50 most-populous metropolitan statistical areas Redfin tracks, only five markets saw pending sales rise in January: San Jose (+13.8 percent), San Francisco (+6 percent), Anaheim (+4.5 percent), Riverside, California (+0.4 percent) and Columbus (+0.2 percent).
Still, Zhao is hopeful about the quickly approaching spring homebuying season. The economic search lead said Redfin’s Homebuyer Demand Index — a seasonally adjusted measure of requests for tours and other buying services from Redfin agents — has been on the rise since mid-January.
Home tours have been on the rebound, too, improving six percentage points from last January (16 percent) as homesellers boost new listings 7 percent year-over-year.
“High mortgage rates brought the local market to a near-standstill from August through November, activity picked up when rates dropped a bit in mid-December, and now it’s slowing down again as rates rise,” Florida-based Redfin agent Luis Rojas said in the report. “I’m advising buyers — especially first-timers — that the mortgage rates they see in the news aren’t the be-all and end-all.”
“Some local lenders are willing to give rates in the 5 percent range for new construction projects because any business is better than no business,” he added.