Lower Mortgage Rates Drive Increased Market Activity Among Potential Buyers

On Thursday, Redfin reported that according to its data, requests for home tours, mortgage applications, and pending sales are rising as mortgage rates decline from the four-month high they hit in late November.

Redfin notes that mortgage rates are easing following a cooler-than-expected jobs report, which signaled another Federal Reserve interest rate cut this month. The average weekly rate dropped to 6.69%, down from a four-month high of 6.84% two weeks ago. This decrease has reduced the typical US homebuyer’s monthly payment to $2,527, the lowest in over two months.

Lower rates have sparked increased buyer activity. Redfin’s Homebuyer Demand Index—a seasonally adjusted measure of buyer interest based on tours and agent interactions—rose 8% year-over-year, nearing its highest level since April. Mortgage-purchase applications surged nearly 20% from a month earlier, and pending home sales climbed 4.1% year-over-year during the four weeks ending December 8th, continuing a steady upward trend observed by Redfin in recent months.

In addition to lower rates, demand is being driven by a sense of market stability, Redfin said, pointing to the resolution of financial uncertainty tied to the presidential election and buyers’ growing acceptance of mortgage rates staying above 6% for the foreseeable future.

In remarks accompanying the report, Chen Zhao, Redfin’s economic research lead, said:

“This week’s data shows the increase in signals like home tours and mortgage applications from the last month is continuing. The recent decline in mortgage rates isn’t pushing demand to new heights. Rather, demand is settling into its new, post-election normal. In the months leading up to the election, house hunters were hibernating; demand was slower than we would have expected, even with high mortgage rates. Now, early-stage demand has jumped up to where we’d expect it to be.”