The housing market is showing signs of life after veering into a dead zone late last year, Emily writes. Why it matters: These green shoots are a good sign for the economy overall and run counter to some of the dire predictions made last fall when mortgage rates were skyrocketing. What's happening: Homebuyers are making peace with higher mortgage rates, and sellers are making peace with the need to cut prices and make concessions. - While home prices will likely keep falling, there's reason to think a recovery in sale activity is already underway.
By the numbers: Pending home sales were up 3% in December from the previous month, according to Redfin's proprietary measure. It was the first monthly increase since October 2021. (They're still down 31% since last year.) - In a report on how the market is turning, Redfin also notes that more folks are taking home tours than during the fall.
- The market's at a turning point, Taylor Marr, Redfin's deputy chief economist, told Axios.
Zoom out: The shift is all about mortgage rates. They went up so fast, and to such a high level, it was hard for buyers to even keep up. When rates started falling back a bit, some of these prospective buyers perked up. - After peaking at over 7% in November, the average rate on the 30-year mortgage is now 6.13%, per Freddie Mac — the lowest since mid-September.
- Plus: Some buyers are able to get rates that start with a 5 — "an important psychological threshold," Redfin notes.
Between the lines: Homebuyers and sellers adjusted their expectations. What once seemed high now seems like sort of a deal. When Stefanie McFall, an architect in Atlanta, started looking for homes last March, she was outbid repeatedly. By early fall, she stopped looking. - Toward the end of 2022, with mortgage rates turning down, she waded back in. Success! She's closing on a five-bedroom house next month with a 5.5% mortgage — the sellers even covered some closing costs. "That would not have happened last spring," she said.
- The house is likely $100,000 less than it would've been last year, she added.
Eric Morales, a tech worker in Alexandria, Va., just bit the bullet on a 6.3% mortgage rate when he bought a three-bedroom house. The rate was "painful," but he said he put on his "macro hat," looked at the last 20 years, and thought, "This isn't so awful." - He was able to negotiate the price down from around $900,000 to $850,000.
The bottom line: When mortgage rates started climbing last year, reaching levels not seen for decades, the situation looked grim — observers, even those who knew this wasn't going to be like the 2008 crash, braced for the worst. - But the low inventory of homes for sale, as well as a continuing desire from folks for more space to work remotely, is helping to prop up sale volumes.
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