Cooling interest rates have opened a path for potential buyers heading into 2024, sparking “cautious optimism” for housing professionals.
First American’s Potential Home Sales Model for November 2023 saw its biggest monthly increase since December 2022, up 1.3%. That translates to 5.30 million potential existing home sales at a seasonally adjusted annualized rate.
The Potential Home Sales Model measures what the healthy level of home sales should be based on economic, demographic, and housing market fundamentals.
First American Chief Economist Mark Fleming says mortgage rate declines in November fueled the data.
Mortgage rates dipped below 7% for the first time since August last week after the Federal Reserve set the stage for rate cuts in the coming year. That decline, holding November’s median household income constant, gave homebuyers an approximately $13,000 boost in house-buying power, FirstAm noted.
Purchase applications rose at the same time interest rates fell, indicating that affordability-minded buyers are paying close attention to the market and moving fast to snap up better rates.
“Heading into 2024, existing-home sales may continue to drift higher if mortgage rates fall further or stabilize,” Fleming said. “However, it’s unlikely that existing-home sales will increase dramatically, as the bulk of existing homeowners will remain rate locked-in, even if rates drift closer to 6%.”
Even as purchase applications are rising, they remain constrained compared to refinances, which have pushed overall application data up over the last several weeks. Inventory improved in November but new listings remain 14% below pre-pandemic norms.
Read More Articles:
Sign up for our free newsletter.