Pending home sales fell 26% year over year during the four weeks ending January 22, the smallest drop in more than three months, according to a new report from Redfin.
Meanwhile, National Association of Realtors reported that in December, pending home sales improved for the first time since May, up 2.5% from November.
Erin Sykes Chief Economist and Real Estate Advisor for Nest Seekers International, tells GlobeSt.com that Q4 was the slowest fourth quarter since 2010, but transaction volume has picked up slightly in January.
“My expectation is that rates hold pretty much stable for the foreseeable future,” Sykes said. “Buyers are realizing this and starting to shop again, armed with the ability to negotiate listed prices.
Balance of Power Shifting to Buyers
Amid increasing interest rates and uncertain economic conditions, “we’re seeing moderate increases in home inventory, and buyers may find the balance of power shifting slightly in their favor,” Sykes said.
“However, the fear of missing out has been replaced by a fear of paying too much, she said. “Prices have pulled back between 5% and 20%, pending market. Inventory has not come on en force, however, as many homeowners won’t want to give up their low-interest rate from refinancing or purchasing over the last two years.”
“We are seeing a pickup in mortgage inquiries and approvals, after a 3- or 4-month lull where it was pretty quiet.
“Pricing strategy is becoming more top of mind as you only have one chance to get first eyes on a property. Pricing too high in this shifting market makes sellers look unreasonable and unrealistic, thus turning off potential buyers.”
Last Year was Like a ‘Rocket Ship’
Jonathan Miller, a member of the Counselors of Real Estate and president & CEO of Miller Samuel, Inc., tells GlobeSt.com that any comparisons against 2021’s conditions have overstated the deterioration in US residential housing market because last year’s conditions were like a “rocket ship.”
He said unemployment remains “unusually low,” and job openings are high, so “even with the rate hikes by the Federal Reserve, mortgage rates have been sliding.
“With every downward rate tick, more borrowers enter the market, and that’s what the monthly increases in pending home sales are showing.”
Competition is Returning
Ruben Concepcion, Realtor and listing specialist at Houwzer, tells GlobeSt.com that the increase in home sales from the previous month is not surprising and definitely is in line with what he is seeing in the field.
“When I take buyers to see a property that matches a lot on their wish list, it is becoming normal again to feel some competition from other buyers, so these buyers are coming back out.
He said it’s the same with his sellers.
“When we price appropriately, it is fair to expect a good amount of traffic on opening weekend,” Concepcion said. “The holidays are over, and buyers are refocusing their attention on their own ownership goals.
“It’s easy to hold off and wait to see if conditions get better, but life goes on and everyone can’t hold off forever.”