gopixa
The US housing market appears to be undergoing a positive transformation as new homes for sale increase and home price growth returns to the pre-pandemic norm.
During a volatile three-year span, home prices rose as ultra-low mortgage rates triggered a buying frenzy, only to pull back when borrowing costs skyrocketed due to the Federal Reserve's mission to contain inflation. Now, although mortgage rates remain elevated, their reduced volatility compared to the peak of the pandemic has played a key role in stabilizing home price growth.
In February, home prices advanced 0.6% month-on-month, in line with the average monthly increase of 0.6% in the roughly eight years before the pandemic, online brokerage Redfin (RDFN) said in a report. recent. Similarly, on a year-on-year basis, prices rose 6.7% in February, compared to the average increase of 6.9% in the years before the pandemic. This is based on the February Redfin Home Price Index, an equal-weighted indicator of repeat sales, covering the three months ended February 29, 2024.
High mortgage rates, caused by the Federal Reserve's aggressive tightening cycle, have dampened homebuyer demand over the years, but “that doesn't translate into lower home prices today because there is still no enough homes for sale, even as new properties for sale recover,” the report says. noted.
On a seasonally adjusted basis, new homes for sale rose 3.8% month-on-month in February to the highest level since September 2022, Redfin said in a separate report, a sign that housing supply is finally starting to expand. from exceptionally tight levels.
That's “great news for buyers who for months have been competing for a small pool of homes for sale,” said Chen Zhao, economic research leader at Redfin. “Still, many house hunters are hesitant to pull the trigger because mortgage rates and home prices remain high.”
The current housing shortage, stemming from post-pandemic increases in material costs, interest rates and inflation, effectively puts the so-called lock-in effect under the spotlight, whereby homeowners are unwilling to put their houses for sale because they don't want to give them up. increase the low mortgage rates they had set before the Federal Reserve began raising rates.
Zillow's (ZG) (Z) latest monthly report also showed that new listings of existing homes on its platform increased 20% in February versus January and 21% year-over-year. And, with just over 900,000 homes, there were more homes for sale in February than in any other February since 2020, the company added.
“We're finally starting to see homeowners who have been putting off moves coming back into the market,” said Skylar Olsen, chief economist at Zillow. “For many households with record wealth, waiting for potentially lower rates later in the year may not be worth it.”
A frame of reference
When the Federal Reserve began its rate hike campaign in March 2022, the average 30-year fixed mortgage rate stood at approximately 4%. The average 30-year fixed mortgage rate was in the 2% to 3% range in 2020, when the pandemic crippled the economy and the Federal Open Market Committee cut rates to near zero to stimulate spending. Before long, pandemic-induced inflation pressures led the Federal Reserve to begin in March 2022 what became its most aggressive rate-raising campaign in decades, with mortgage rates topping 4% at the time. Raising its benchmark interest rate to 5.25-5.50% from near zero, mortgage rates in late 2023 peaked at 7.79% (the highest level seen in more than 20 years) before fall to 6.87% on March 21, according to Freddie Mac data on the St. Louis Federal Reserve's FRED database.
So far in 2024, the year the Federal Reserve expects to begin easing monetary policy, mortgage rates have remained in a relatively narrow range of ~6.60%-6.95%. Mortgage rate volatility may be declining, but housing affordability is still at low levels, hence the persistent standoff between buyers and sellers.
