Mortgage News March 10, 2023
According to Redfin’s Housing Market Tracker for January, the housing market’s recovery may have been stunted by elevated real estate prices and depleted inventory levels. Pending home sales rose by 0.5% from December 2022, compared to December’s increase of 1.4%, which marked the first rise in 14 months. Pending sales decreased for the second month in a row on a yearly basis, falling to 29.4% in January from 32.5% in December and a record 35.5% drop in November.
Purchase applications have also plummeted to their lowest level since 1995, following the Federal Reserve’s remarks cementing expectations that they would raise the nominal interest rate at their next meeting to combat inflation that has been a persistent issue for the economy. The typical homebuyer’s monthly payment has increased by more than $500 year over year, as the average 30-year-fixed mortgage rate reached 6.5%, up from 6.27% in January and 3.89% a year ago.
In addition, closed home sales fell 1.4% from December 2022 and plummeted 36.6% year-over-year, largely due to many home purchases that closed in January going under contract in the fall, when mortgage rates peaked at a 20-year high. The “lock-in” effect, where homeowners with low-interest rates stay put in fear of higher rates, led to a 1.6% decrease in new listings in January from December and a 19.9% decline year-over-year. Though an improvement from December’s 25.3% year-over-year decline, listings still remain scarce, with January recording the fewest new listings since April 2020, when the pandemic froze the housing market. Roughly 85% of mortgage holders have a rate well below the current rate of approximately 6%.
In January, the median sale price of US homes was $383,249, a 1.4% decrease from December and 11.5% below the May all-time high. Nonetheless, prices were up 1.5% from a year earlier, primarily because low supply kept prices stable. Finally, the typical home in January stayed on the market for 51 days, the highest level since the pandemic began in February 2020, up from 27 days a year ago. During the month, bidding wars were less frequent, as 42.1% of Redfin’s sold properties indicated a decrease from 43.1% in the previous month and 68% a year ago.
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