Mortgage Rates Hit Three Percent
Since reaching a low point in January, mortgage rates have risen by more than 30 basis points, and the impact on purchase demand has been noticeable. While purchase activity remains high, it has cooled off over the last few weeks and is currently on par with early March, prior to the pandemic. However, the rise in mortgage rates over the next couple of months is likely to be more muted in comparison to the last few weeks, and we expect a strong spring sales season.
Housing market data show signs of disruption related to recent severe weather. With large swaths of the country reeling from back-to-back winter storms, the number of home sellers putting their homes up for sale declined by a larger margin and while homes are still selling faster than one year ago, the gap narrowed. The relentless advance of the median home price was uninterrupted, and with the housing supply seeming to bear the brunt of the storms’ impact, we expect to see a continued supply-demand imbalance that will mean home price increases ahead.
- Median listing prices grew at 14.5 percent over last year, notching the 28th consecutive week of double-digit price growth. With an ongoing gap between supply and demand that was worsened by recent storms, this upward pressure on prices is expected to remain. Although they remain low, mortgage rates have begun to increase and are expected to rise further later in the year, thus affordability will test buyer demand in the months ahead.
- New listings–a measure of sellers putting homes up for sale–continue to fall behind the year ago pace, registering 35 percent lower this week. We saw a clear upswing in newly listed homes at the end of 2020, but 2021 has been marked by large and consistent declines thus far. Despite early weakness, we expect to see new listings grow in March and April as they traditionally do heading into spring, and last year’s extraordinarily low new listings comparison point will mean year over year gains. With existing inventory of homes for sale continuing to be limited, homebuyers are increasingly turning to new construction, helping to fuel continued increases in new home sales so far this year.
- Total active inventory continues to decline, dropping 49 percent. With buyers active in the market and seller participation more easily delayed early in the year, homes are selling quickly and the total number actively available for sale at any point in time continues to decline. In January as a whole, the number of for sale homes dropped below 600,000.
- Time on market was 7 days faster than last year meaning that quick decisions are still the norm, but the pace of quickening slowed. Buyers will still need to be targeted and decisive to succeed in this fast-moving housing market.