Early-Stage Homebuying Demand Up in November, After Hitting Record Low in October

Redfin reported on Thursday (12-15-22) the findings of their Homebuyers Demand Index (HDI)—a measure of home-tour requests and other services from Redfin agents—is up 10% and mortgage-purchase applications are up 14% from the end of October, when both hit their 2022 lows. Redfin attributes the increase in activity to steadily declining mortgage rates.

Redfin says that the weekly average mortgage rate came in at 6.31% this week, down from a peak of 7.08% during the final week of October. This in turn is saving the average home buyer more than $200 on their monthly payment.

While things are improving, demand and purchasing applications are still sharply lower than a year ago. Pending homes sales are down more than 30% year-over-year and homes are selling at their slowest pace in nearly two years. The US median home-sale price increased just 1.4% year-over-year, the slowest growth rate since the start of the pandemic—a clear reflection of still-cool homebuyer demand.

Adding additional background and his analysis, Taylor Marr, Redfin’s Deputy Chief Economist, said of the HDI report:

“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. 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.”