Could this home buying season, kicking off with the Presidents Day weekend, signal a cool down in the market?
The Presidents Day holiday marks the unofficial start of the home buying season, traditionally active until the end of May.
High mortgage rates last year sidelined buyers and stalled homeowner moves, setting the stage for this year’s market trends.
Predictions suggest a rebound in the housing market with previously owned home sales expected to rise.
Economic indicators and Federal Reserve rate decisions could influence mortgage rates and homebuyer activities.
Early indicators show budding demand, yet actual transactions remain uncertain.
Touring activity and consumer sentiment in housing show improvements.
Mortgage rates, swayed by the 10-year Treasury yield and economic data, can impact homebuying decisions.
Pending home sales have recently declined, potentially due to elevated mortgage rates and weather conditions.
As the Presidents Day holiday approaches, it heralds the unofficial start of the home buying season, traditionally a period of increased activity stretching to the end of May. After a challenging year marked by high mortgage rates that pushed many buyers to the sidelines, this season’s outset could provide critical insight into the state of the housing market for 2024.
Forecasters are optimistic, projecting a bounce back from last year’s slump that saw sales of previously owned homes drop to a near 30-year low. The Mortgage Bankers Association’s chief economist, Mike Fratantoni, notes a substantial pool of prospective buyers ready to enter the market this spring. However, the path to recovery may not be straightforward. Economic vigor, paired with the Federal Reserve’s interest rate policies, could inject volatility into mortgage rates, potentially influencing buyer decisions.
Early signs are promising, with an uptick in prequalification requests suggesting buyers are preparing to act. The Mortgage Bankers Association’s index, while still lower than last year, shows increased activity, and Redfin’s data via ShowingTime indicates a quicker rise in home touring than in the previous year. Additionally, January’s consumer sentiment improved, according to Fannie Mae, with a historic survey response indicating more consumers believe mortgage rates will decrease rather than increase over the next year.
Nonetheless, prospective buyers felt the sting of volatility earlier this month when Federal Reserve Chair Jerome Powell dispelled expectations of a rate cut in March, and strong economic data fueled inflation concerns. These factors led to a spike in mortgage rates, as measured by Mortgage News Daily, raising eyebrows about the potential impact on spring home sales.
Key economic data, such as employment figures and wage growth, suggest that keeping inflation at bay may be challenging. The market now looks to the upcoming consumer price index report for clues on the inflation trajectory. Any surprises could affect Treasury yields and, by extension, mortgage rates.
The last few weeks have seen a parallel between a slight increase in mortgage rates and a drop in home purchase contract signings, with Redfin reporting the sharpest year-over-year decline since October 2023. Observers note that, alongside rate fluctuations, harsh winter weather may also be contributing to restrained home shopping activity.
Forecasters, including those from the Mortgage Bankers Association, Fannie Mae, and the National Association of Realtors, anticipate mortgage rates to settle around 6% by the year’s end. This projection is critical
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