Springtime open houses and quick decisions

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Published Date 3/11/2024

Things are looking up for real estate lately. Those who report the numbers are taking any scrap of improvement they can get after such a long, desolate journey through interest rate purgatory and expanses of low inventory deserts.

“Evidence that purchase demand remains sensitive to interest rate changes was on display this week, as applications rose for the first time in six weeks in response to lower rates,” Sam Khater, Freddie Mac’s chief economist, said in a statement. “Mortgage rates continue to be one of the biggest hurdles for potential homebuyers looking to enter the market.”

Realtor.com’s Margaret Heidenry reports that in addition to falling mortgage rates, the housing market got another burst of good news this week: listings are now flooding the market. So she asks what this double dose of encouraging information might mean.

“In late February, the Fed chose to hold rates steady rather than raise or lower them,” says Heidenry. “Since then, mortgage rates have been on the rise.” Fed rates are not directly tied to mortgage rates, although the two numbers often move in the same direction. But rising rates have persuaded some homebuyers to downshift into “wait-and-see” mode. More clarity on the course of rates could unfold when the Federal Reserve meets again on March 20 and 21.

“Despite the central bank’s projection of potential rate cuts in 2024, pinpointing the optimal timing for such a shift has been a challenge,” says Realtor.com economist Jiayi Xu. “Specifically, the risk of a dangerous inflation rebound is looming if rate cuts are made ‘too soon or too much.’ However, if the rate cuts are ‘too late or too little,’ it could have adverse effects on the economy.”

The real numbers? The week leading up to March 2 experienced a whopping 19.9% more properties actively for sale compared with last year’s levels — the most abundant level of inventory since 2020. This also marks a 19-week streak upward.

This jump in new listings means new options–vitally important for shoppers with a specific must-have list. As the spring market picks up, more sellers tend to enter the market, offering buyers a more comprehensive number of homes to choose from. It also means, however, that buyers aren’t wasting much time in making an offer when they see something they like. That means the typical home will spend fewer days on the market compared with this time last year. So if you’re a buyer, don’t snooze.

Still, there is the elephant in the room so many don’t want to mention. “The bigger picture on the housing supply side is still stark, with the number of homes on the market down nearly 40% compared with the pre-pandemic years from 2017 to 2019,” says Heidenry.

Home prices? They’re kinda stuck. The median home listing price was flat compared to the same week last year, with prices not having climbed annually since October 2023.

A glass-half-full analogy might just come in handy for now. As “Eye-gor” said in the classic movie Young Frankenstein: “Could be worse. Could be raining.”

Realtor, TBWS

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