Existing-home sales may have been down last month, but it appears that buyers are preparing for new year purchases.
According to Redfin, early-stage demand was up last month following an October lull. Its Homebuyer Demand Index–a measure of home-tour requests and other services from Redfin agents–is up 10 percent and mortgage-purchase applications are up 14 percent from the end of October, when both hit their 2022 troughs.
“Slowing inflation and the hope of the Fed easing rate hikes in the new year are likely to bring mortgage rates down further and thereby improve homebuying demand,” said Redfin Deputy Chief Economist Taylor Marr. “But don’t call it a comeback or even a recovery yet; demand is still way down from its peak. We’re keeping a close eye on the labor market for confirmation that inflation will continue slowing. A strong job market like the one we have now contributes to inflation because it pushes up wages and leads to higher prices. Though it seems counterintuitive, a slight uptick in unemployment and/or slower economic growth would likely help bring mortgage rates down further. If that happens, the increase we’re seeing in early-stage demand could translate to an uptick in pending sales in early 2023.”
While these early-stage indicators have risen from the trenches, demand and purchase applications are still down sharply from a year ago. Additionally, Redfin notes that pending home sales are down more than 30 percent year over year and homes are selling at their slowest pace in nearly two years.