Mortgage rates have retreated, but homebuyers aren’t looking to jump in.
Pending home sales were up just 0.7% in late October, the smallest gain in four months, even with average mortgage rates dropping to their lowest level in a year.
Lower borrowing costs could bring shoppers off the sidelines, but stubbornly high rates and economic uncertainty continue keeping wallets closed.
According to Redfin and as reported by Business Wire, the typical home is now taking 48 days to sell, the slowest October pace since 2019. Buyers have gotten cautious and picky, and they’re waiting for a deal that feels right.
For sellers, that spells patience, price cuts, or both, as the market inches forward instead of bouncing back.
Buyers are hesitant, even as rates fall
Lower mortgage rates should be a green light for buyers, but they’re more like a flashing yellow light at this point.
The numbers suggest that affordability seems to be improving, yet the sentiment shows otherwise, with most shoppers still cautious, weighing job security and potentially waiting on the sidelines for the “perfect” deal.
Prices still rising faster than confidence
Even with mortgage rates easing, home prices haven’t been giving buyers much of a break at this point. Prices aren’t giving buyers much of a break.
Sale prices have held firm, but also posted their biggest bump in six months, suggesting that sellers still have plenty of leverage even in a cooling market.
Redfin’s snapshot of housing market:
- Median sale price: Up 2% to $392,375, the sharpest bump in half a year
- Median asking price:$395,500, up 2.9%, showing sellers haven’t lost faith
- Median days on market:48 days, the longest October stretch since 2019
- Mortgage payment: Down 2.1% to $2,508, on the back of lower rates, but still lofty for most budgets
- Homes sold above list price: Only 22.8%, down from 26%, a quiet signal that bidding wars aren’t cooling off
- Sale-to-list price ratio:98.3%, slipping slightly, indicating that buyers are regaining some of their negotiating power
The fear factor: jobs, inflation, and “perfect home syndrome”
Buying a home is typically an emotional decision, but at this time, it seems downright nerve-wracking.
Redfin agent Rebecca Love summed it up perfectly: Buyers aren’t quitting, they’re just being pickier than ever.
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After years of rate bumps, layoffs, and price increases, people feel hesitant to lock in a 30-year payment. That essentially means the bar for a “dream home” has never been higher, while the tolerance compromise has never been lower.
Most shoppers are now looking to extend their searches for months, in hopes of finding the perfect mix of affordability, location, and stability.
What homebuyers face in the current market:
- Rates still feel high: The 30-year fixed rate averaged around 6.22% this week, up from 6.17% last week, though lower than 6.79% a year ago.
- Job jitters: The October jobless rate is estimated to be at 4.4%, the highest in four years.
- Sticker stress from inflation: Headline CPI jumped 3.0% year over year in September, with food up 3.1%, as price fatigue lingers.
- Confidence is fragile: Michigan’s consumer sentiment dropped to 53.6 in October, down 24% from a year ago.
- Thin financial cushions: The personal saving rate came in at 4.6% in August, offering a limited buffer for surprises.
- Debt overhang & late payments: Household debt is at a whopping $18.59 trillion in Q3; 4.5% are now in some stage of delinquency.
The market feels stuck in neutral, with a few bright spots
The housing market is moving, but it’s barely shifting out of park.
Pending home sales have edged up just 0.7% year-over-year, the smallest bump in four months. Sellers are holding steady, but buyers aren’t rushing back.
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Some metros are holding firm, though.
In Detroit, prices shot up 11.6%, followed by Cleveland (9.6%) and Philadelphia (6.9%). On the flipside, some are sliding. Dallas (-3.3%), San Antonio (-2.2%), and San Diego (-2%). Moreover, on a national scale, the median sale price climbed 2% to $392,375, its biggest increase in six months.
Hence, the market isn’t frozen, just remarkably sluggish, slow enough to test everyone’s patience.
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