NewsMortgage Demand is Up, But Homes Continue to Sit on The Market...

Mortgage Demand is Up, But Homes Continue to Sit on The Market for Longer


Mortgage Rates Fall, and Homebuyer Demand Increases

The housing market is noticeably stronger now than it was a few months ago, primarily because of lower mortgage rates. The 30-year fixed-rate mortgage dropped to 6.12% on February 9 and rose to 6.32% on February 16th. Despite the latest slight increase, the current rate is much lower than what buyers had to pay last November when the 30-year mortgage rate eclipsed 7.0%.

Because mortgage rates are noticeably lower now than they were a few months ago, there is now more demand in the housing market than there used to be. Mortgage applications, for example, grew about 20.0% from January 2 to February 13.

Homebuilder Sentiment Spiked in February

Homebuilder sentiment increased significantly in February and January, according to the National Association of Home Builders (NAHB) Housing Market Index (HMI). The latest increase in February was one of the largest monthly increases in homebuilder sentiment in a decade. Increased demand and lower mortgage rates are the main factors behind this trend.

“With the largest monthly increase for builder sentiment since June 2013, excluding the period immediately after the onset of the pandemic, the HMI indicates that incremental gains for housing affordability have the ability to price-in buyers to the market,” NAHB Chairman Alicia Huey said in a press release.

The Market May be Transitioning More Toward a Buyer’s Market

Buyers who wish to enter the market have a variety of hurdles they must face. Despite the fact that mortgage rates are lower now than they were at last year’s peak, borrowing costs still remain quite high. Sales prices are also very high compared to pre-pandemic levels. Additionally, inflation has made everything more expensive relative to wage growth.

However, there are reasons for buyers to remain optimistic that conditions can improve in the near future. First, it looks like mortgage rates peaked last November and will likely end the year at around 6.0%. Also, the expert consensus is that there will be no growth in home prices throughout 2023, with the possibility of a slight decrease. Even though home prices are already high, no price growth throughout the year is positive news for buyers, possibly signaling a return to normalcy.

Homes are also sitting on the market much longer than last summer. Last May, the average home was on the market for 31 days. By this January, that same home would have been on the market for 71 days. Homes are on the market for longer, partially due to declining home sales. There were 1,150,000 existing home sales last May, but existing home sales declined to 980,000 properties this January. This decline is good news for buyers as it indicates less competition for each property, which may incentivize sellers to lower sales prices or provide more generous terms.

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