Pending home Sales in January, according to Redfin [1], fell 26.2% year-over-year, the smallest drop in more than three months.
However, pending sales began to rise on a monthly basis in December 2022, when buyers started to return to the market, who were encouraged to do so due to falling mortgage rates and their increased negotiating power. This means early homebuyer demand, or mortgage purchase applications, are up 28% since November.
But more demand amid low inventories, which are down 18% from a year ago, have been enough to hold prices steady. The median U.S. home-sale price rose 1.1% year over year to $350,000, the biggest increase in over a month. On a local level, the number of metros where prices are falling from a year earlier is shrinking. Home prices declined in 17 of the 50 most populous U.S. metros, with the biggest drops in the Bay Area, down from 20 at the beginning of January.
Redfin agents also report that there is an increase in interest from potential clients, and touring activity is up as well.
“Homebuyers are starting to feel more confident as mortgage rates tick down closer to 6% than 7% and the overall economy chugs along with surprising resilience, especially in the labor market. Steadily cooling inflation is likely to prevent mortgage rates from jumping back up,” said Redfin Economics Research Lead Chen Zhao [2]. “When rates were seesawing up and down in the fall, many buyers dropped out because they could wake up the day after finding their dream home to a three-digit increase in their potential monthly payment. Now they have a better sense of how far their budget will go in which neighborhoods and which homes they can afford.”
Other leading indicator of homebuying activity, along with market takeaways, as highlighted by Redfin include:
- For the week ending January 26, 30-year mortgage rates dropped to 6.13%, hitting their lowest level since September. The daily average was 6.18% on January 25.
- Mortgage-purchase applications during the week ending January 20 increased 3% from a week earlier and 28% from their early-November trough, seasonally adjusted. Purchase applications were down 39% from a year earlier.
- The seasonally adjusted Redfin Homebuyer Demand Index—a measure of requests for home tours and other homebuying services from Redfin agents—was up 6% from a month earlier during the four weeks ending January 22. It was down 29% from a year earlier.
- Google searches for “homes for sale” were up about 40% from their November low during the week ending January 21, but down about 21% from a year earlier.
- The median asking price of newly listed homes was $367,450, up 3.8% year over year.
- Among the 50 most populous U.S. metros, sale prices fell in 17, with the biggest drops in San Francisco (-9.3% YoY), Oakland, CA (-6.5%), Austin (-6.3%), Detroit (-5.5%) and San Jose, CA (-5.4%). Prices increased most in West Palm Beach, FL (13.5%), Nashville (9.6%), Milwaukee (9.2%), Indianapolis (7.8%) and Montgomery County, PA (7.7%).
- The monthly mortgage payment on the median-asking-price home was $2,323 at the current 6.13% mortgage rate. That’s down nearly $200 from the October peak. Monthly mortgage payments are up 29% from a year ago.
- Among the 50 most populous U.S. metros, pending sales fell most in Las Vegas (-63.2% YoY), Phoenix (-56%), Nashville (-52.5%), Jacksonville, FL (-52.1%) and Austin (-50.7%). Pending sales rose in one metro: Cincinnati (+11.7%).
- Active listings (the number of homes listed for sale at any point during the period) were up 23.6% from a year earlier.
- Months of supply—a measure of the balance between supply and demand, calculated by dividing the number of active listings by closed sales—was 4.4 months, up from 4 months a week earlier and 2.1 months a year earlier.
- 33% of homes that went under contract had an accepted offer within the first two weeks on the market, up from 29% during the prior four-week period but down from 40% a year earlier.
- Homes that sold were on the market for a median of 47 days. That’s up from 32 days a year earlier and the record low of 18 days set in May.
- 21% of homes sold above their final list price, down from 40% a year earlier and the lowest level since March 2020.
- On average, 5% of homes for sale each week had a price drop, up from 2.1% a year earlier.
- The average sale-to-list price ratio, which measures how close homes are selling to their final asking prices, fell to 97.8% from 100.1% a year earlier. That’s the lowest level since March 2020.