Redfin reported on Friday (1-13-23) that homes are selling at their slowest pace since April 2020, amid beginning of the COVID-19 pandemic. In the four-week period ending on January 8th, the typical home sold was on the market for 44 days, which in turn has led to the largest annual inventory increase on record. Year-over-year, for the same time period, pending home sales dropped 32% to their lowest level on record, while mortgage-purchase applications fell to their lowest level since 2014.
Redfin noted that high mortgage rates and extreme winter weather at the start of the year, along with traditional end of the year holidays, certainly distracted would-be home buyers. However, there are early-stage signs that demand is beginning to pick up. Google searches for “homes for sale” are on the rise. Redfin’s Homebuyer Demand Index—a measure of tours requests and other buying services—was also up 6% over the previous 4-week period. Slowing inflation in December for the sixth month in a row and wage growth softening were also given as reasons would-be home buyers are feeling better about the markets.
Redfin’s Deputy Chief Economist Taylor Marr summed up the report this way:
“We’re entering 2023 with positive economic news. The latest consumer price index report confirms that the worst of inflation is behind us. That means the Fed is likely to continue easing its interest-rate increases, which should cause mortgage rates to continue gradually declining. This could bring back some homebuyers in the coming months. We’ve already seen an uptick in people initiating home searches. Although those house hunters haven’t yet turned into buyers, they may soon, given that monthly mortgage payments are notably down from their peak and the latest inflation and employment data lower the chances of a recession.”
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