In the ever-evolving landscape of the United States housing market, there are hopeful signs that the deep freeze that has gripped residential real estate might be finally thawing. Recent data and trends indicate a shift towards a more favorable environment for buyers and sellers alike, hinting at brighter days ahead.
October brought a glimmer of hope as pending home sales saw a one percent increase on a monthly basis, reaching the highest seasonally adjusted level in a year, according to data from Redfin. Concurrently, mortgage applications surged by 6 percent on a monthly basis, marking a 40 percent increase from the previous year, according to the Mortgage Bankers Association. These encouraging figures reflect a resurgence of interest in the housing market.
One of the critical factors contributing to this resurgence is the increase in available inventory. New listings of homes for sale rose by 3 percent year-over-year during the week ending November 10, as reported by Redfin. This marks the most substantial inventory increase in approximately two years. The influx of new listings is welcome news for prospective buyers who have faced limited options in recent times.
Builders are also showing signs of increased activity, albeit cautiously. Housing starts rose to a seasonally adjusted 1.3 million in October, representing a 1.9 percent monthly increase, according to the Census Bureau’s Monthly New Residential Construction report. Furthermore, housing completions reached a seasonally adjusted 1.4 million, indicating a 4.6 percent increase from the previous October. While construction activity remains below 2022 levels, the upward trajectory is a promising development.
One of the most significant contributors to the housing market’s recent woes has been elevated mortgage rates. However, there is relief on the horizon. Mortgage rates have eased since mid-October, thanks to a retreat in bond yields and cooling inflation. As of last week, the average rate on the 30-year fixed mortgage stood at 7.44 percent, down from a peak of 8 percent in October. This reduction in rates offers renewed hope for prospective buyers.
Despite these positive indicators, experts remain cautiously optimistic. Daryl Fairweather, chief economist at Redfin, suggests that the housing market’s recovery may unfold gradually rather than as a sudden transformation. He believes that while some buyers and sellers may reenter the market due to lower mortgage rates, the overall recovery is likely to be a slow and steady process.
On the other hand, some experts warn of potential challenges on the horizon. As the U.S. economy shows signs of deceleration, concerns loom over the housing market’s ability to rebound swiftly. Fannie Mae has cautioned that even without a recession in the near future, the housing market could face prolonged difficulties. The Federal Reserve’s commitment to maintaining higher interest rates to combat inflation might pose an ongoing obstacle to a robust housing recovery.
