Rising rates and home prices stifle January market: Redfin

The Federal Reserve’s policy shift depressed homebuyer and homeseller activity in January, according to Redfin. Monthly new and active listing growth dropped to the lowest levels since last summer.

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Elevated mortgage rates and rising home prices led to the first month-over-month declines in new and active listings since last summer, signaling a potentially slow start to the upcoming spring homebuying season.

Redfin’s latest market report revealed new listings declined 1.2 percent month over month on a seasonally adjusted basis in January and grew at a slower rate on an annual basis (+2.7 percent) compared to December (+4.2 percent). Meanwhile, active listings (i.e. the total number of homes for sale) declined on a monthly (-0.3 percent) and annual (-4.4 percent) basis.

Pending sales took a hit from December, with monthly growth slowing from 5.1 percent to 1.1 percent. Even with the slowdown, pending sales were at the highest level since September 2022.

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Hal Bennett | Credit: Redfin

Redfin Premier agent Hal Bennett blamed slowing buyer and seller activity on the Federal Reserve’s policies. In December, the Federal Reserve planned for three rate cuts by the end of 2024. Homebuyers and sellers had hoped the first of those cuts would come early this year; however, Fed Chair Jerome Powell said in January the Reserve needed more quantitative data to prove the U.S. economy is on a “sustainable path down to 2 percent inflation.”

“A lot of my customers are paying close attention to what the Federal Reserve says. Buyers and sellers came off the sidelines in December when the Fed signaled it would lower interest rates three times in the next year, but now some are getting cold feet because the Fed indicated that rate cuts may come later than expected,” Bennett said. “Inflation and geopolitical conflicts are also scaring some buyers. April, at the absolutely earliest, is when I think things could take off.”

In addition to elevated mortgage rates, Redfin said consumers are contending with rising home prices. The median home sale price rose 5.2 percent year over year on a seasonally adjusted basis to $402,343, the largest annual jump in 17 months.

Camden, New Jersey (+14.3 percent); Miami (+13.8 percent); and Knoxville (+13.6 percent) experienced the most sizeable jumps in median home sale prices, while the biggest declines happened in San Antonio (-4.9 percent); Austin, Texas (-4.4 percent); and Memphis (-3.9 percent).

“America’s enduring shortage of homes for sale is the primary driver of price growth; both new listings and active listings remained far below pre-pandemic levels in January,” the report read.

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