The housing market wakes from the dead

 
 

The housing market is showing signs of life after veering into a dead zone late last year.

Why it matters: These green shoots are a good sign for the economy overall, and run counter to some of the dire predictions made last fall when mortgage rates were skyrocketing.

What's happening: Home buyers are making peace with higher mortgage rates, and sellers are making peace with the need to cut prices and make concessions.

  • While home prices will likely keep falling, there's reason to think a recovery in sale activity is already underway.

By the numbers: Pending home sales were up 3% in December, according to Redfin's proprietary measure. That was the first monthly increase since October 2021. (They're still down 31% since last year.)

  • In a report titled, "The Housing Market Has Started to Recover" Redfin also notes that more folks are taking home tours than during the fall.

  • The market's at a turning point, Taylor Marr, Redfin's deputy chief economist told Axios.

Zoom out: The shift is all about mortgage rates. They went up so fast, and to such a high level, it was hard for buyers to even keep up. When rates started falling back a bit, some of these prospective buyers perked up.

  • After peaking at over 7% in November and crushing demand for homes, rates then fell at the fastest pace since 2009, as the market started to feel the Fed was slowing down its rate hikes.

  • The average rate on the 30-year mortgage is now 6.13%, per Freddie Mac data out Thursday. That's the lowest level since mid-September.

  • Some buyers are even able to get rates that start with a 5 — "an important psychological threshold," Redfin notes.

Between the lines: Home buyers and sellers adjusted their expectations. What once seemed high now seems like sort of a deal.

What they're saying: When Stefanie McFall, an architect in Atlanta, started looking for homes with her husband and kids in the suburbs last March, they were outbid repeatedly — many houses sold for $250,000 over asking. By early fall, they stopped looking.

  • This year, with mortgage rates turning down, they waded back in. Success! They're closing on a five-bedroom house next month with a 5.5% mortgage — the sellers even covered some closing costs. "That would not have happened last spring," she said.

  • "We didn’t mind paying a little higher interest rate because it felt like we had a little more buying power," McFall said in a message. The house is likely $100,000 less than it would've been last year, she added.

Keep reading on Axios.

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