Why we might not see the usual seasonal home sale slowdown this year
Why we might not see the usual seasonal home sale slowdown this year
The housing market usually slows down in the fall and winter after the spring-and-summer selling season, but that trend might not hold this year.
In September, existing home sales were anemic while pending home sales soared. Pending home sales, a leading indicator of the market for existing homes, rose nearly 7.5%, much more than expected.
That, however, was when mortgage rates had fallen to just above 6% — those rates have risen quite a bit since then. In the last few weeks, they’ve risen again to around 6.75%.
All of this makes for a housing market that’s really “unpredictable”, said Israel Hill, managing broker at John L. Scott Real Estate in Portland, Oregon. “The interest rates going up. A lot of things are on hold. The election is putting a lot of pressure on people, pausing decision-making.”
Hill said the real estate business is good, but lately, houses have been sitting on the market longer. According to Lawrence Yun, chief economist at the National Association of Realtors, that’s because there’s more inventory now.
“Thirty percent more listings in September versus one year ago. More choices for consumers,” Yun said.
Those consumers are in a better position to buy because jobs are plentiful. Yun added that “in the past couple of months, wage growth exceeded home-price appreciation.”
Most analysts think the recent spike in mortgage rates is temporary — tied to stronger-than-expected economic data and uncertainty about the election.
Bill Adams, chief economist at Comerica Bank, said, “The Fed has signaled pretty clearly that they’re likely to continue cutting short-term rates in the near term. So that’s probably going to translate to lower mortgage rates as well.”
By the end of the year, mortgage rates could be closer to 6%, predicted Guy Cecala at Inside Mortgage Finance. That decrease in borrowing costs could encourage more homeowners to sell and buy a new home.
Bill Adams said there’s another reason to expect more properties to come on the market: the passage of time.
“It’s been five years since housing was really normal,” Adams said. “A lot of Americans have become empty nesters or they’ve had kids, or divorced or separated. And so the housing that they had no longer fits their lifestyle.”
Meanwhile, homebuyers are finally getting used to higher mortgage rates. “Because of the new normal, nobody’s thinking the interest rates are going to be at 3%,” Portland broker Israel Hill said.
Those adjusted expectations might be a good thing, according to Mike Fratantoni at the Mortgage Bankers Association. “Having mortgage rates twice as high as those record lows I think has taken some getting used to,” he said. “But from the longer sweep of history—a 6% rate is a good rate.”
From the late 1970s to the early 1990s, mortgage rates rarely dipped below 10%.
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