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Mortgage rates eased for the first time in five weeks, Freddie Mac said Thursday.
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At the same time, newly listed homes climbed 13% year-over-year in the four weeks to March 3.
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Easing affordability and improving inventory suggests a gradual thawing of the market.
The US housing market has been mostly frozen since the pandemic boom, but fresh data out Thursday suggests signs of a spring thaw.
Freddie Mac reported that rates on the most popular home loan fell for the first time in five weeks to hit 6.88%, down from 6.94% the prior week. At the same time, the number of newly listed homes in the four weeks to March 3 spiked 13% compared to one year ago.
Easing borrowing costs and an uptick in available inventory together offer a welcome signal for Americans seeking homes. It also points to a softening of the “lock-in” effect — current owners being unwilling to move or refinance at higher interest rates — that’s kept housing market activity muted. It wasn’t long ago that house hunters and current owners could lock in a 3% rate on their mortgage.
Indeed, an uptick in demand was evident in Freddie Mac’s latest report, as mortgage applications rose for the first time in six weeks amid the dip in rates.
“Mortgage rates continue to be one of the biggest hurdles for potential homebuyers looking to enter the market,” Sam Khater, Freddie Mac’s chief economist, said in a statement. “It’s important to remember that rates can vary widely between mortgage lenders so shopping around is essential.”
Mortgage rates have dipped this week amid the renewed outlook for rate cuts this year, as Fed Chair Jerome Powell testified to Congress that the central bank is still looking to loosen monetary policy in 2024.
Meanwhile, Realtor.com on Tuesday reported that February saw 339,370 homes for sale, roughly an 11% increase compared to the same month in 2023. While that’s still about 17% below pre-pandemic levels in 2019, the upward trend is there.
However, Capital Economics strategists wrote earlier in the week that easing mortgage rates won’t be enough to spark a meaningful, lasting rebound in home demand. The research firm expects house prices to climb 5% in 2024, which is above the consensus forecast of 3%.
“Even if mortgage rates fall to 6% as we expect, mortgage rate ‘lock in’ will continue to curb home moves,” Capital Economics strategists wrote in a note. “As a result, we only anticipate a trickle of new resale supply coming onto the market over the next few years.”
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Around one in every six Brits is now considering buying a property, encouraging new statistics reveal.
A poll of 2,000 adults found 16% are considering purchasing a home now mortgage rates are falling.
And the survey by Cala Homes discovered that 27% of those considering a house move agreed things are looking more positive.
New homes
A fifth of prospective buyers are considering moving in the next 12 months, believing there are more new homes on the market in their area, with 44% of the total sample considering buying a new build when they next move.
People [are] gaining confidence that 2024 could be the right time to move.”
Allan Walker, Director of Sales and Transformation, Cala Homes
Allan Walker, Director of Sales and Transformation at Cala, says: “There are signs of optimism in the housing market, with people gaining confidence that 2024 could be the right time to move.
“Buying incentives and stabilising mortgage rates have encouraged the view that the upcoming year holds promise for a more favourable landscape,” he says.
“It seems many are now more inclined to explore opportunities around moving home.”
Property jargon
However, 61% feel confused by the jargon associated with the home moving process.
Phrases like ‘desk underwriting’, ‘stock plots’ and ‘porting your mortgage’ were found to be among the most perplexing house move terms.
Scratching heads
It also emerged ‘indemnity insurance’, ‘deposit unlock’ and ‘capital gains tax’ have left buyers and sellers scratching their heads.
As a result, 41% admit they have moved home in the past without fully understanding the language used throughout the process.
And 45% of these went on to say because they go through the process so infrequently, it is easy to forget what words and phrases mean.