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Mortgage rates continue to be a thorn in homebuyers’ sides into the new year, as evidenced by a downturn in contract signings despite greater home tour activity.
Redfin’s latest market report revealed its Homebuyer Demand Index, a seasonally adjusted measure of tours and other buying services from Redfin agents, grew 2 percent annually during the week ending on Jan. 5. However, pending home sales (e.g. contract signings) declined 3.1 percent annually as daily average rates for 30-year fixed-rate loans breached 7 percent.
While some buyers are playing the waiting game, others have decided to bite the bullet and take advantage of a pop in active listings.
Emily Lam | Credit: Redfin
“Some buyers are getting serious about their search because they’ve come to terms with 7 percent rates and they’re worried that if they wait longer, home prices will just keep rising,” Seattle-based Redfin Premier agent Emily Lam said in a written statement. “Others are starting their search in hopes that rates will decline soon. Either way, I’m advising buyers to get serious now because desirable listings will get more competitive as the year goes on.”
The median asking price increased 4.5 percent year over year to $374,975 for the four weeks ending on Jan. 5, while the median sale price increased 5.5 percent to $375,998. Steady sales price growth and rising mortgage rates have resulted in median monthly mortgage payments increasing 6.7 percent to $2,525.
The market has proven to be slightly less competitive, with the share of homes off the market in two weeks declining from 23 to 22.5 percent and the median days on market increasing from 43 to 49 days. The average sale-to-list price ratio remained unchanged at 98.2 percent while the share of homes sold above list price declined from 24 to 22.1 percent.
On a regional basis, the Midwest had the most robust gains in median sales prices with Milwaukee (+19.5 percent), Cleveland (+17.1 percent) and Warren, Michigan (+13.6 percent) all posting double-digit gains. Meanwhile, the West led the way in pending sales growth, with Anaheim, California (+10 percent), San Jose, California (+7 percent), and Portland, Oregon (+3.1 percent) sitting in the top five markets with increasing contract signings.
The East saw the most seller activity, with new listings in Washington D.C. (+9.4 percent), Virginia Beach, Virginia (+7.2 percent), and Miami (+6.6 percent) experiencing a healthy boost despite the holiday season.
Although sales have slowed, Lam said homebuyers must be prepared to make strong offers to win a listing.
“Three of the four offers my clients have made in the last week have competed against other offers with competitive terms, like waiving all contingencies and releasing earnest money early,” she said. “Some homes are getting multiple offers within 24 hours of hitting the market.”
Redfin’s numbers were largely consistent with the picture that agents from other brokerages painted in response to the latest Inman Intel Index survey, which was conducted from late December into early January.
In Intel’s survey, agents reported a significant number of buyers returned to their pipelines as they closed the book on 2024. Agents also reported having a more optimistic outlook for their business prospects in the year to come.
