Although the Federal Reserve hiked interest rates on Wednesday, mortgage rates veered in the opposite direction and tumbled.
For the week ending March 23, the nationwide average for the popular 30-year fixed-rate mortgage was 6.42%, according to Freddie Mac. That’s down from last week—and it’s the lowest level in more than a month.
It’s a small reprieve and much-needed break for homebuyers, but don’t look for it to last. When the Fed raises rates, mortgage rates usually rise in kind.
“Economic conditions will keep upward pressure on rates,” notes Sabrina Speianu, economic data manager for Realtor.com®, in her recent analysis. This “will continue to present an affordability challenge for buyers and may keep some sellers, who are locked in at lower rates, waiting on the sidelines.”
In this installment of “How’s the Housing Market This Week?” we’ll take a look at the housing market stalemate, what it’ll take to get moving, and what this all means for both homebuyers and sellers.
Home prices are plateauing
Although home prices are still inching up, they’re starting to level off.
For the week ending March 18, listings prices were 6.3% higher than this same week a year earlier.
“This remains the lowest sales-price growth rate since June 2020,” explains Speianu. Plus, interest rates “are expected to remain elevated in the near term, which implies that home prices may continue to soften this spring season.”
Another factor to keep in mind is that list prices are just what sellers hope to get. While that ideal hovered at a lofty $415,000 in February, the actual sales price of homes—in other words, what buyers and sellers agree on after haggling—can be much lower. And according to the National Association of Realtors, that price has declined by 0.2% annually, marking the first such drop in 11 long years.
Tapering home price will come as welcome news to buyers, but sellers are understandably displeased—and it shows in the dwindling number of new listings.
Every week for the past nine months, there have been fewer homes listed for sale than in the same period a year ago, and the week ending March 18 was no exception. Weekly data shows that new listings were 20% lower than at this time in 2022.
“Moreover, sentiment toward housing—and selling sentiment in particular—worsened in February, as fewer consumers expect home prices to increase over the next year,” notes Speianu. “This low consumer sentiment and increased economic uncertainty could mean that fewer homeowners decide to sell compared to last year in the spring homebuying season.”
The number of homes for sale is at half pre-pandemic levels
This may come as a surprise to many frustrated would-be home buyers, but there are actually more homes available for sale out there right now than in 2022. In fact, total housing inventory (of listings both new and old) is up 59% compared to a year earlier.
But these listings have been languishing on the market, spending an average of 18 days longer than a year ago.
And if you take in the bigger picture, inventory might be up from a year ago but is down (way down) from the pre-pandemic days, when there were 50% more homes on the market.
Yet, as the weather warms, hope springs eternal that homebuyers and sellers alike will break out of hibernation. In fact, the very best time to sell for 2023 is the third week in April, when listings are slated to receive 16% more views than usual and fetch $8,400 more per sale.
“So far, the usual seasonal pick-up in the pace of home sales seen in the springtime is continuing this year as we approach the best time to sell a home, which typically falls in April,” Speianu predicts.
All that said, this rosy outlook hinges on what mortgage rates do next. By Andrea Riquier
Copyright – Printed with permission Realtor.com