In a remarkable shift within the U.S. housing market, pending home sales rose significantly in December, marking the largest jump in over two years. This development, highlighted in Redfin’s latest report, indicates a renewed enthusiasm among homebuyers, triggered by a substantial decrease in mortgage rates.
Key Developments in December
- Rising Pending Home Sales: According to Redfin, a leading technology-powered real estate brokerage, there was a 4.1 percent month-over-month increase in pending home sales on a seasonally adjusted basis in December. This is the most substantial rise since September 2021, reaching the highest level in over a year. Compared to the previous year, sales climbed by 5.9 percent, marking the most significant annual gain since June 2021.
- Mortgage Rate Decline Spurs Buyer Interest: A major factor driving this upswing was the notable drop in mortgage rates. The average rate for a 30-year fixed mortgage plummeted to 6.82 percent in December from 7.44 percent in November, the largest monthly decline since 2008. This decrease reinvigorated buyers, especially those who had been hesitant when rates were above 7 percent.
- Sellers Re-entering the Market: The dip in mortgage rates also encouraged more sellers to list their properties. New listings rose slightly by 0.1 percent month-over-month, the highest since September 2022, and increased by 2.7 percent year-over-year. However, seller activity hasn’t matched the intensity of buyers, partly because many current homeowners are reluctant to lose the low mortgage rates they secured during the pandemic.
- Housing Supply Still Below Pre-Pandemic Levels: While there’s been a slight increase in housing supply, it remains lower than pre-pandemic figures. Active listings rose by 3.1 percent month-over-month but were still down by 5.1 percent from the previous year.
- Home Prices on the Rise: The median U.S. home sale price in December was $403,714, a 4 percent increase from the previous year and the largest annual rise since October 2022. The increase in homebuyer demand, coupled with the persistent shortage of homes, is a significant factor driving up prices.
- Regional Variances: The report also highlights differences across various metro areas. For instance, New Orleans saw the most significant year-over-year increase in pending sales, while places like Honolulu experienced notable declines. Similarly, median sale prices varied greatly across different regions.
Outlook for the Housing Market
Despite the upturn in December, January has started slower than expected, likely due to severe winter weather. Redfin economists anticipate the market will gain momentum as spring approaches, provided mortgage rates remain stable.
Implications for Buyers and Sellers
For potential buyers, the current scenario presents a window of opportunity, given the slightly eased mortgage rates and increasing property listings. Sellers, on the other hand, might face a more competitive market but can benefit from the rising home prices.
