Homebuyer demand saw a marked improvement in September, potentially signaling the start of a market recovery.
This uptick in demand was evident across several indicators. Mortgage rate locks more than doubled compared to the previous month, while mortgage purchase applications climbed by 10 percent. Homebuyers are driven by a drop in mortgage rates to levels not seen in two years; last week, the average rate was only a hair above 6 percent.
Redfin’s Homebuyer Demand Index reached its highest point since April, according to a report from the brokerage. There was a notable 9 percent month-over-month increase in the index, which tracks demand through tours and services done through a Redfin agent.
Mortgage rate moves have had a tangible impact on affordability. The benchmark monthly payment for new homebuyers decreased to approximately $2,500. That’s a decrease of nearly 6 percent from the previous year the — most substantial year-over-year improvement observed since the early stages of the COVID-19 pandemic.
Pending home sales, meanwhile, were flat year-over-year for the four weeks ending on Sept. 29. While that’s not the same as transactions rising, it is the first time since January that pending sales didn’t decline on an annual basis.
A slim majority of the 50 most populous metros did see an annual increase in pending home sales, led by 13 percent rise in Phoenix and 12 percent boost in San Jose. Some markets, however, continue to face challenges due to climate-related issues and rising insurance costs.
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While these developments paint a picture of a market on the rebound, there are still challenges for buyers and sellers alike. For the four weeks ending on Sept. 29, the median asking price rose 5.3 percent year-over-year, the biggest jump since February.
Inventory is also a challenge. The report noted a 4.2-month supply of homes available — the highest level since February — but active listings increased annually by the smallest amount since April.