Context is king: Yes, mortgage rates remain considerably higher than they were at the start of 2022, but for the first time in four months, some popular options have dipped below 6 percent. So, what does that mean for buyers?
Redfin took at look at a number of lending options and purchase indicators and found that a homebuyer on a $2,500 monthly budget can afford a $400,000 home—for the first time since September.
A buyer on that budget still has about $95,000 less in spending power than they did a year ago, when rates were sitting around 3.5 percent.
“We expect more homebuyers and sellers to gradually return to the market by springtime, but mixed economic news and mixed reactions from the market mean the recovery will be uneven,” said Redfin Economics Research Lead Chen Zhao. “The Fed’s interest-rate hike this week, for example, is both promising and disappointing. The Fed hiked rates at a slower pace than last year, which means mortgage rates are unlikely to rise further. But it also signaled ongoing rate increases to fight inflation, which will likely prevent the steep mortgage-rate decline that some optimistic buyers have been waiting for.”
Home sellers are also starting to come off the sidelines. According to Redfin, new listings of homes for sale declined 17 percent year over year–the smallest one in over four months and an improvement from the December, when new listings dropped 24 percent annually.
Additionally, Redfin reports that the seasonally adjusted Redfin Homebuyer Demand Index–a measure of requests for home tours and other homebuying services from Redfin agents–hit its highest level since September during the four weeks ending January 29. It was up 5 percent from a month earlier, but down 25 percent from a year earlier. Google searches for “homes for sale” were up about 44 percent from their November low during the week ending January 28, but down about 16 percent from a year earlier.