Falling Mortgage Rates Have Yet to Improve Home Sales, With Buyers Uncertain About NAR Settlement, Election
Pending home sales posted their biggest decline in nearly a year, despite the median U.S. housing payment dropping to its lowest level in five months
Pending home sales fell 6.9% during the four weeks ending August 25, the biggest annual decline in nearly a year according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage. That’s despite the median monthly U.S. housing payment falling to its lowest level since February as weekly average mortgage rates drop to their lowest level in 15 months.
Sales aren’t yet improving because many would-be homebuyers are playing the waiting game. Redfin agents report that house hunters are touring homes, but some of them are hesitant to buy right now. Would-be buyers are waiting for one or all of the following:
- Clarity on the NAR settlement. The new rules for how agents, buyers and sellers negotiate agent fees went into effect on August 17. Some would-be buyers and sellers are waiting to see how these rules play out before getting into the market. “Some buyers have likely been scared off by agents falsely claiming that the new NAR rules require an exclusive buyer representation agreement just to tour a home,” said Jason Aleem, Redfin’s chief of real estate services. “At Redfin, we make sure buyers understand our fees before they tour, but we would never lock you into working with us before we’ve had a chance to win your business.”
- Lower home prices. Even though monthly payments are declining, home-sale prices are just a few thousand dollars shy of early July’s record high. That’s partly because inventory is losing momentum; the total number of homes for sale posted its smallest year-over-year increase in five months.
- Lower mortgage rates. Some homebuyers are hoping mortgage rates will decline more than they already have after the Fed cuts interest rates in September. (It’s worth noting that if mortgage rates do drop significantly, it could lead to more competition and higher home prices.)
- The outcome of the presidential election. Some house hunters are hesitant to make a big purchase amid this year’s political uncertainty, and believe the outcome of the presidential election could change the course of economic, housing and other policies that affect their decision to move.
“I expect more buyers and sellers to jump into the market in a few months, once everyone has a better understanding of how the new NAR rules will play out in actual real-estate deals,” said Fernanda Kriese, a Redfin Premier agent in Las Vegas. “The election and the drop in mortgage rates are also delaying buyers; a lot of them are waiting on the sidelines until November, hoping to get a lower rate and maybe more homes to choose from.”
Mortgage-purchase applications are up 1% week over week on a seasonally adjusted basis, suggesting that at least some buyers are coming off the sidelines, but applications are still down 9% from a year ago.
For Redfin economists’ takes on the housing market, please visit Redfin’s “From Our Economists” page.
To view the full report, including charts, please visit:
https://www.redfin.com/news/housing-market-update-pending-sales-housing-payments-fall
