This year’s traditional spring homebuying season may have disappointed, but fall was going to be different, the real estate world bet. The narrative: Mortgage rates at 11-month lows and hype around the Federal Reserve’s interest rate cutting plans would finally convince buyers to come off the sidelines.
Nice try. So far, there are few signs that the housing market has emerged from its deep slump, even now that mortgage rates are holding stable at around 6.3%. Inventory is climbing, suggesting that sellers are willing to test the market. But today’s rates and prices remain too high to interest most buyers.
“Mortgage rates have come down, but they’re still within range of where they’ve been since late 2023,” said Daryl Fairweather, chief economist at Redfin. “It really isn’t a huge motivator.”
Mortgage rates averaged 6.27% this week through Wednesday, near year-to-date lows, and down from the 6.6%-6.7% range they were stuck in most of this spring. While the drop has improved affordability slightly, the changes haven’t been drastic enough to pull buyers off the sidelines, especially because home prices are still climbing in many markets.
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In July, Zillow calculated that mortgage rates would need to hit 4.43% — far lower than even the most optimistic projections — in order for a median-income family to afford a typical home in the US.
Today’s market suggests an ongoing stalemate between buyers and sellers.
Buyers may now be waiting on potential lower rates in the spring, while many sellers have low mortgage rates and the flexibility to wait for higher-priced offers — and pull listings if they can’t get their desired price.
Meanwhile, the traditional markers of failed sales — like contract cancellations and pulled listings — remain high. Around 56,000 home sales, or 15% of what went under contract in August, were ultimately called off, according to Redfin. That’s the highest cancellation rate for the month since 2017.
‘Playing wait and see’
Real estate professionals in markets that have been hot and cold this year all say buyers appear to be picking up some power this fall as sales slow.
In San Antonio, Texas, there’s often a small uptick in fall homebuying, but it hasn’t materialized this year, said Realtor Mark Stillings. While the city’s best-priced homes still sell quickly, everything else is sitting. Inventory has jumped as buyer demand has remained weak, and sellers frequently find themselves competing against new construction homes, which can be attractive to buyers for their builder-paid rate buydown offers.
“The people who would like to purchase a home on a discretionary basis — they’re still playing wait and see,” Stillings said. “The people I see purchasing in this market are probably having some life event: They’ve got a promotion that makes them feel economically comfortable, there’s a divorce, or they need to get in a better school district.”
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In traditionally hot markets in the Northeast and Midwest, holdout buyers are picking up slightly more power as inventory rises. Price cuts are growing more common, and days on market are starting to climb in the suburbs west of Boston, said Morgan Guthrie, a real estate agent at Douglas Elliman Real Estate in Wellesley, Mass.
“The market is trying to balance out a little bit,” Guthrie said. “There are buyers out there, but prices just aren’t where buyers want them yet, and sellers, I don’t think, are ready to make that jump.”
Contract signing slows
Nationwide, new listings rose 4.1% in the four weeks through Oct. 12 from a year earlier, according to Redfin, while contract signings are moving the other direction: They’re down 1.2% in the same period.
Abby Smith, who leads the Realize Team, a group of agents in Fairlawn, Ohio, said sales for the year started out strong. Inventory was low, and multiple-offer situations that led to homes selling for over asking price were common. But around August, everything “hit the brakes.” Since then, inventory has been climbing steadily while buyers have been cautious.
Even so, prices are still climbing. Northeast Ohio has seen some of the fastest home price appreciation anywhere in the country, with median prices up about 4% in September compared to a year ago.
Now, those gains appear to be straining some would-be buyers.
“Buyer affordability continues to get harder and harder,” Smith said.
Meanwhile, she’s starting conversations with buyers and sellers who are hoping to enter the market next spring. At some point, prices are likely to plateau, which may give new buyers a fresh opportunity to enter the market, especially if inventory continues to improve.
“There’s a lot of pent-up supply and demand going on here,” she said.
Claire Boston is a Senior Reporter for Yahoo Finance covering housing, mortgages, and home insurance.
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