The Federal Reserve’s recent announcement of a modest interest rate hike has brought down mortgage rates for the second consecutive week, as per a new report by Redfin. While this news may bring temporary relief to prospective homebuyers, Redfin’s overall outlook for the spring housing market remains largely unchanged. The demand for homes is likely to fluctuate based on changes in rates and the availability of properties on the market.
Mortgage rates have declined, but demand for homes remains tight, with new listings of US homes falling by 22% from last year. This decrease in inventory is causing homes to sell faster than expected, with nearly half of homes that went under contract receiving accepted offers within two weeks of hitting the market. This trend is likely to continue as there is little inventory to choose from.
While the housing market usually picks up speed during spring, this year, there is no typical seasonal increase in business. Buyers and sellers are hyper-focused on mortgage rates, causing demand to swing up and down. The average daily mortgage rate has dropped from 6.75% to 6.45% after the Federal Reserve’s announcement, and the average weekly rate has dipped to 6.42%. As a result, mortgage-purchase applications have increased by 17% from a month ago, and the number of homebuyers contacting Redfin agents for tours and other services has risen.
Although mortgage rates have decreased, there is still intense competition for properties on the market since many potential sellers are hesitant to sell due to the low mortgage rates and limited supply. Daryl Fairweather, the Chief Economist at Redfin, has stated that mortgage rates are not likely to rise unless the upcoming inflation report exceeds expectations. As a result, this could present an opportunity for potential buyers who have been waiting on the sidelines to secure a mortgage rate closer to 6% rather than 7%.
In conclusion, while the modest hike in interest rates may bring some temporary relief to homebuyers, the overall housing market remains highly competitive. With limited inventory and low mortgage rates, sellers are reluctant to put their homes on the market, leading to a situation where buyers are competing fiercely for a limited number of available properties. However, the recent decline in mortgage rates could offer a window of opportunity for prospective buyers looking to lock in a favorable rate.