The real estate industry illuminati believe that mortgage rates dropping below 6% will get housing markets moving again, but there’s growing evidence that the recent decline in rates is already doing so.
Redfin’s Homebuyer Demand Index — which measures homebuyer requests for agent services like home tours — was up 9% month over month at the end of September, hitting its highest level since April. Mortgage rate lock-in activity was also double what it was a month earlier.
While mortgage rates haven’t moved since the Federal Reserve’s half-point interest rate cut last month month, the news of the cut reached a lot of people who didn’t know mortgage rates had already dropped.
“There’s no doubt demand has picked up since the Fed’s interest-rate cut,” Phoenix-area agent Max Shadle said in a statement. “I’m seeing much more traffic at my listings. Falling rates are an incentive for homeowners to sell, too, because they know demand is coming back and they feel less locked in by their relatively low rate. But many people still have an ultra-low mortgage rate from a few years ago, and they’re not quite ready to let go.”
Redfin is also observing a change in home sales. According to its data, pending sales increased on a year-over-year basis in 27 of the 50 most populous metro areas. At the national level, pending sales turned flat after nine straight months of declines.
Phoenix, a market that has slowed considerably after an intense post-pandemic boom, experienced a 13% increase in pending sales, the most of any of the 50 metros. San Jose (+12%) and Portland, Oregon (+10%) — two other markets that have been cold — showed large increases.
The report said that Florida is showing huge declines in demand as a result of climate-related events, rising insurance costs and higher homeowners association fees. West Palm Beach (-18%), Fort Lauderdale (-16%) and Miami (-16%) posted large declines in pending sales.
Redfin’s report tracks with a number of others that show positive signs of homebuyer demand.
According to Altos Research data, pending home sales rose 6.4% year over year at the end of September, bucking a seasonality trend in which sales start to recede in the fall. The Mortgage Bankers Association (MBA) reported that mortgage applications hit their highest level in more than two years, while the Redfin homebuyer index from last week showed similar results to the new one.
