Mortgage rates fell for the sixth consecutive week, but real estate activity remained subdued as the holidays approached.
According to . Rates have fallen more than three-quarters since mid-November after the Federal Reserve signaled it would slow its interest rate hikes amid slowing inflation.
Yet rates remain 3 percentage points higher than they were at the start of the year, leaving many first-time buyers sidelined and sellers – who have not taken down their listings – more willing to negotiate. .
“As the holidays approached, mortgage rates continued to fall,” Sam Khater, chief economist at Freddie Mac, said in a press release. “Rates have come down significantly over the past six weeks, which is helpful for potential buyers, but new data indicates homeowners are reluctant to list their homes. Many of these homeowners are weighing their options carefully, as more than two-thirds of current homeowners have a fixed mortgage rate below 4%.
Housing affordability remains a challenge
Demand for mortgages improved slightly from the previous week, according to the Mortgage Bankers Association’s for the week ending December 16, but buying activity was down 3% from the previous week. Overall, purchase requests were down 36% from a year ago, the MBA noted, as most price-hit buyers opted to wait longer.
“A slowdown in buyer activity is typical at this time of year,” New American Funding branch manager Scott Sheldon told Yahoo Money, adding that buyers prefer to wait until after the holidays to return. to their purchasing plans.
Still, the housing downturn began well before the start of the holiday season, as many buyers were spooked by rising mortgage payments and interest rates, “first-time buyers being the hardest hit”, a said Sheldon.
According to , the national median mortgage payment was $1,977 in November. Although that amount is down from October’s $2,012, the average payment is still 42.9% higher, or $594 more per month, than at the start of the year.
“As a buyer, seeing rates go from an average of 3% to a loan of 6.50% is a tall order,” Sheldon said. “That’s what people are facing right now and the only way to compensate is to negotiate a purchase price.”
Sellers cut listing prices
Many sellers who are unwilling to negotiate or lose their current low mortgage rate give up selling altogether.
A record 2% of homes for sale were taken off the market each week on average in the 12 weeks to November 1. 20, Redfin data showed, against 1.6% a year earlier. The share of write-offs improved to 1.9% in the 12 weeks ending November 1. 27.
However, sellers who remain in the market reduce their prices more often.
The share of dwellings benefiting from a price reduction has increased to in November, compared to 9.2% a year earlier, according to Realtor.com. Some 37% of builders slashed prices last month, down from 26% in September, according to the with an average price drop of 6%.
Overall, the national median list price fell to $416,000 in November, according to down from October’s $425,000 and June’s record high of $449,000.
According to Mike Fratantoni, the MBA’s chief economist and senior vice president of research and industrial technology, it will be some time before house prices normalize again.
“Home prices are expected to remain roughly flat nationally and this trend will continue through 2024,” Fratantoni told Yahoo Money. “Home prices won’t shy away from buyers like they have been in recent years and rates will come down – but it will be a weaker economy, so that will be a challenge for some buyers.”
Gabriella is a personal finance reporter at Yahoo Money. Follow her on Twitter @__gabriellacruz.
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