Some Homebuyers Return to the Market Following a Drop in Rates

Whether the current economy is labeled a recession or not doesn’t matter – what’s key is consumer sentiment, especially related to the housing market, according to Redfin deputy chief economist Taylor Marr.

“The under-the-hood stats—on consumption, real income and inflation—significantly worsened last quarter,” Marr said. “Weaker economic growth and poor consumer sentiment are weighing on both homebuyers and sellers.”

A weak economy can lead to potentially falling mortgage rates, Marr said, and “could help bring more rate-sensitive homebuyers off the fence to move forward with a purchase.”

Mortgage rates seemed to be on their way to 6 percent about a month ago, but for the week ending July 28, 30-year mortgage rates fell to 5.3% — down from the 5.81% peak for 2022.

Notwithstanding, Redfin reported that a half-point drop in mortgage rates recently is drawing some homebuyers back to the market.

Demand Increase Not Translating to Contracts or Sales

Redfin’s Homebuyer Demand Index—a measure of requests for home tours and other home-buying services from Redfin agents—has increased 15 points since the week of June 19, reversing a 10-week trend of decreasing demand that began in mid-April, the company said.

However, the uptick in early demand has not carried through to home-purchase contracts or sales.

Kimberly Lanham, SVP, Digital Risk, tells GlobeSt.com that although rates may be lower, housing supply is still at a historic low, inflation is high and buyers face a lot of economic headwinds. 

“Let’s all remember that news headlines cannot tell someone what they can afford or how to budget or buy a home.”

This week’s back-to-back drop in Gross National Product nonetheless, “The housing market seems to be settling into an equilibrium now that demand has leveled off,” said Redfin chief economist Daryl Fairweather in prepared remarks.