Pending home sales were flat from a year earlier in September, marking the first time since January pending sales didn’t decline, according to a new report from Redfin.
It’s worth noting the data is compared to a period last year when sales slumped as mortgage rates surged into the mid-7 percent range.
Pending sales increased year-over-year in 27 of the 50 most populous U.S. metros, the most since January. They rose most in Phoenix, with a 13 percent increase, followed by San Jose, Calif. (12 percent) and Portland, Ore. (10 percent).
Homebuying demand is starting to improve in those places after dropping to a low point last year, but pending sales are still below pre-pandemic levels. Sales are still posting big declines in Florida, where homebuyers have backed away due largely to climate disasters and rising insurance and homeowners association costs. Pending sales fell 18 percent year-over-year in West Palm Beach, more than anywhere else in the country, followed by 16 percent drops in Fort Lauderdale and Miami, according to Redfin.
“There’s no doubt demand has picked up since the Fed’s interest-rate cut; I’m seeing much more traffic at my listings. But even though homes are selling, they’re still not typically getting multiple offers,” Max Shadle, a Redfin Premier agent in Phoenix, said in a release. “Falling rates are an incentive for homeowners to sell, too, because they know demand is coming back and they feel less locked in by their relatively low rate. But many people still have an ultra-low mortgage rate from a few years ago, and they’re not quite ready to let go.”
Homebuying demand at earlier parts of the buying process is improving, too. Redfin’s Homebuyer Demand Index is up 9 percent month-over-month to its highest level since April. Homebuyers locked in more than twice as many mortgages than they did a month earlier on Sept. 30, according to Optimal Blue data, and mortgage-purchase applications are up 10 percent month-over-month.
Homebuyers are starting to return because housing costs are coming down, according to Redfin. The average 30-year mortgage rate dropped to 6.08 percent last week, its lowest level in two years, pushing the typical homebuyer’s mortgage payment down to $2,529, near its lowest level since January. That’s a 5.9 percent decline, the biggest year-over-year drop since May 2020. Additionally, the Fed’s mid-September interest-rate cut caused many Americans to realize that mortgage rates have already declined about as much as they’re going to for the foreseeable future.
Declining mortgage rates are also encouraging some homeowners to sell, though that’s not a new trend: Listings have been on the rise for nearly a year, and September’s 4.3 percent increase is on par with those over the last few months, Redfin data shows.