Homebuyers are beginning to come out of the woodwork due to the largest drop in mortgage rates since 2008 pushing pending home sales up 4.1% month-over-month on a seasonally adjusted basis in December—the highest level in more than a year.
This news comes to us from a new report from Redfin which found that pending home sales 5.9% year-over-year, the biggest annual gain since June 2021.
According to Redfin, pending home sales jumped because of a steep drop in mortgage rates that pulled some would-be buyer/sellers out of the lock-in effect and off the sidelines; though sellers have not returned with as much intensity as buyers.
New listings rose 0.1% month-over-month to the highest seasonally adjusted level since September 2022, and were up 2.7% year-over-year—the largest increase since July 2021.
While housing supply has ticked up, it remains below pre-pandemic levels. Active listings, or the total number of homes for sale, rose 3.1% month over month on a seasonally adjusted basis but fell 5.1% year-over-year.
“We’re definitely seeing an uptick in activity from both buyers and sellers,” said Abby Alwan, a Redfin Premier real estate agent in Austin, TX. “I have two listings in the suburbs that six months ago would’ve sat on the market. But all of a sudden, buyers are coming out of the woodwork thanks to lower rates. More folks are looking to have conversations about what they need to do to enter the market now that they’ve seen improvement in the market.”
It’s worth noting that while demand jumped in December, January is off to a slower-than-expected start, likely due to severe winter weather. Redfin economists expect the market to pick up as spring approaches, so long as mortgage rates don’t shoot up.
Looking at the U.S. median home sales price, this number climbed 4% year-over-year to $403,714 in December, the biggest annual increase since October 2022, but fell 1.1% month-over-month. The recent uptick in homebuyer demand is likely contributing to the rise in housing prices, but the primary driver of price increases is America’s persistent shortage of homes for sale, which is fueling competition in some areas.
All homes for sales totaled 1,569,438 (up 3.1% since November), New listings totaled 407,255, homes sold totaled 407,255, and months of supply were 2.6 and the typical home stayed on the market for 43 days.
“Bidding wars are happening again, but they’re much more reasonable than they were during the pandemic homebuying frenzy,” Alwan said. “Houses are getting between one and five competing bids, and instead of offering one or two hundred thousand dollars over the asking price, competitive buyers are offering 3% to 5% over.”
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