Potential buyers are coming out of the woodwork and touring homes, but that activity has yet to turn into a sales surge.
Redfin’s Homebuyer Demand Index, which measures requests for tours and other buying services from Redfin agents, increased by 6% in the week ending January 28.
Buyers are touring homes as rates hover in the mid-6’s, an exciting moment of stability in the wake of a rollercoaster year. Some are worried that rates will swing back up– or that ongoing home price appreciation will push their dream home out of reach regardless.
But the increase in touring has yet to translate into actual home sales. Purchase applications have actually declined, and Redfin says pending sales saw a huge drop.
“I thought declining mortgage rates and more inventory would cause the market to take off right at the start of the new year. But even though demand has picked up some, I’m not wowed,” Hal Bennett, Redfin agent in Seattle, said.
Sale prices are a growing issue, up 5.5% YOY just in the four weeks ending January 28, the biggest bump in more than a year. Lack of inventory, leading to high competition over affordable homes, has kept prices elevated and killed the dream for many Americans.
Some sellers are still locked-in by historically low interest rates and don’t want to lose them, even if they would prefer a new home.
“Now I believe this year’s market will launch in the spring, once 6% rates are even more entrenched in buyers’ psyches and more homeowners list their houses,” Bennett added.
Redfin says the boost in tours will eventually turn into pending sales, partly due to typical seasonal increases as spring arrives. Winter weather generally keeps people home, but this year’s rash of dangerous cold exacerbated the problem.
“Real estate is usually slow in the Midwest in the winter, but this year it’s even slower than usual because the weather has been so extreme,” Grand Rapids, MI real estate agent Christine Kooiker said.
More homes on the market should help buyers along as well. Construction continues booming, and more homes for sale will ease competition for both new and existing properties, allowing prices to cool.
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