Mixed market signals: Mortgage rates shoot up, sales trend positive 

The housing market continues to defy expectations: Mortgage interest rates hit another high for the year, while rising home prices are making it even more difficult to buy a home — yet consumers are still finding ways to get deals done.

A spate of economic data this week is giving mixed signals about what's really happening during this spring homebuying season. Today, Freddie Mac reported the 30-year fixed-rate mortgage jumped again this week, averaging 7.17% — the highest level since the end of November. A year ago, the 30-year rate averaged 6.43%.

The 15-year fixed-rate mortgage averaged 6.44% this week, up from 5.71% a year ago.

Meanwhile, the National Association of Realtors reported that pending home sales rose 3.4% from February to March and 0.1% year-over-year — an indicator of increasing market activity — while Census data showed that new home sales were up both monthly and annually in March. 

Existing home sales, on the other hand, dropped 4.3% from February to March — perhaps the biggest sign that would-be buyers are struggling with high mortgage rates and home prices.

"What should buyers do in the face of persistently high mortgage rates? Although inventory is still limited and sellers tend to have the upper hand in most markets, home buyers should still approach sellers to ask for help with closing costs or to buy down rates," said Lisa Sturtevant, chief economist at Bright MLS. 

"New home builders have been offering concessions and rate buydowns. And offers of concessions from sellers of existing homes — which had almost disappeared during the pandemic — are on the rise again," Sturtevant added.

Pending sale optimism

While the March pending sales numbers from NAR reflect only a modest increase from a year ago, the forecast for home sales in 2024 remains bullish. In its April 25 report, NAR predicts home sales will rise 9% in 2024 to an annualized rate of 4.46 million, crossing back over the 5 million mark in 2025.

NAR also expects home prices will increase 1.8% in 2024, roughly in line with consumer price inflation and wage growth.

"Home sales have lingered at 30-year lows, and since 70 million more Americans live in the country now compared to three decades ago, it's inevitable that sales will rise in coming years," said Lawrence Yun, NAR's chief economist. 

"Inventory will grow steadily from more home construction, and various life-changing events will require people to trade up, trade down or move to another location," Yun predicted.

Applications down, inventory up (but so is demand)

With mortgage rates rising, applications continue to slow down, according to the Mortgage Bankers Association. Overall applications were down 2.7% compared to a week earlier, and purchase applications were down 15% compared to a year ago.

But more sellers appear to be putting homes on the market, leading to a rise in inventory. New listings are up 10.2% compared to a year ago, while active listings are up 10.1%, according to Redfin's weekly market report. Supply has increased to 3.2 months, moving closer to the 4-5 month range that's generally considered a more balanced market between buyers and sellers.

Even with rising inventory, Redfin's Homebuyer Demand Index is near its highest level in about eight months, keeping sale prices up.

"My advice for serious buyers who can afford today's costs is to shop for your dream home and accept that this year is probably not the time to find a dream deal," said Redfin Economic Research Lead Chen Zhao. 

"Price growth may cool slightly in the coming months if mortgage rates stay high or rates might fall slightly — but overall housing costs are likely to remain elevated for the foreseeable future," Zhao said.