Mortgage rates rose this week, following much anticipated news by the Federal Reserve this Wednesday to hold its benchmark borrowing rates steady.
The average rate for a 30-year fixed home loan inched up from 6.74% to 6.87% for the week ending March 21, according to Freddie Mac.
“After decreasing for a couple of weeks, mortgage rates are once again on the upswing,” Sam Khater, Freddie Mac’s chief economist, said in a statement. “Despite elevated rates, homebuilders are displaying renewed confidence in the housing market, focusing on the fact that there is a good amount of pent-up demand, an ongoing supply shortage, and expectations that the Federal Reserve will cut rates later in the year.”
The official arrival of spring has also ushered in a pop of positive news for housing: A whopping 17.8% more sellers listed their homes in the week ending March 16 compared with last year.
“This is the highest year-over-year growth rate in new listings seen since May of 2021,” says Realtor.com® economic data managerSabrina Speianu in her most recentanalysis. “This increase in newly listed homes means more fresh options for buyers heading into the spring homebuying season.”
Will this flush of brand-new listings jump-start a housing market that’s been stuck in neutral as of late, or will high mortgage rates keep buyers and sellers on the sidelines? We’ll break down how the latest real estate market data will come into play as the new buying and selling season revs up in this installment of “How’s the Housing Market This Week?”
The mortgage rate question
Although the Fed is expected to cut rates three times this year, this relief might not come as early as many might like, given recent inflation data came in higher than expected, according to Speianu. (Although the Fed’s rates and mortgage rates are different, they tend to move in the same general direction.)
Although mortgage rates are down from their multidecade peak of 7.79% from last October, rates might not be low enough for many budget-minded home shoppers, who might take what Speianu calls a “wait and see” approach to homebuying. This means some buyers might choose to keep an eye on rates and pounce only when—or if—they fall.
“If mortgage rates continue to remain steady, it is likely that buyers may wait to lock in lower rates later this year,” says Speianu.
Those buyers watching rates may want to keep a close eye on the economy as well.
“Falling mortgage rates hinge on falling inflation, but recent data still puts inflation well above the Fed’s 2% target,” Realtor.com senior economic research analyst Hannah Jones adds. “The latest projections show that interest rates are likely to be higher for slightly longer than expected in the previous update, but the trajectory will remain dependent on incoming inflation and employment data.”
Home prices are flat
Home shopper hesitancy has hammered home prices, with median list prices flat for the week ending March 16 compared with the same period last year. (The median price of a home was $415,500 in February.)
As buyers mull their bottom line, some sellers are lowering asking prices to lure them in.
“Sellers who have already listed their homes are adjusting to make their listings more competitive, and the share of available listings that have had a price reduction continues to increase,” explains Speianu.
The inventory share of price-reduced homes rose in February by 1.4% compared with the previous year.
“This pace of increasing price reductions has continued into the first few weeks of March,”Speianu points out.
Home inventory continues to grow
Spring homebuyers headed into the housing market will find it’s not just fresh listings that are up but also overall active inventory, which jumped a whopping 23.8% above year-ago levels for the week ending March 16.
“This past week, sellers continued to list homes at a pace much higher than last year,” says Speianu. “For the 19th straight week, active listings registered above the prior year’s level, which means that today’s home shoppers can consider more options.”
Yet this good news doesn’t seem so great when you pull back and view the big picture: Total housing inventory is down nearly 40% compared with typical pre-pandemic levels from 2017 to 2019.
“However, new home supply is looking promising as homebuilders cranked up activity in February,” says Jones. “Housing starts climbed 5.9% year over year and home completions were nearly 10% higher annually in February, signaling potentially more home options in coming months.”
What to expect as the spring market kicks in
Yet home shoppers solely focused on where mortgage rates are headed might be wise to shift their focus to what else is happening in the housing market as spring progresses.
For instance, Speianu points out that buyers will be “facing a trade-off as home listing prices typically also peak in the summer months.”
Some homebuyers are already wasting no time to close the deal, with the typical home spending two days less on the market for the week ending March 16 compared with the same period last year. (Homes spent an average of 61 days on the market in February.)
“More home options mean more buyers are finding what they are looking for amid scarce inventory,” says Speianu. “So homes continue to move relatively quickly.”
“As the spring season approaches, many buyers and sellers are getting warmed up to enter the housing market. Some existing homeowners are likely to be hesitant to list their home for sale in today’s high-rate environment,” adds Jones.
“Both progress in inflation and a boost in home supply would help the housing market return to more balance and affordability,” she continues. “Inflation moving toward 2% would allow for easing mortgage rates, and more home supply would relieve upward price pressure. When these two levers start to move in the right direction, many buyers will see a more favorable housing market.”
