Slowest housing market in five years characterized by sluggish sales of mortgages

As indicated by a recent report from Redfin, the US housing market is currently facing a sluggish period, being the slowest it has been in five years. Homes are remaining on the market for almost two months due to high mortgage rates and escalating home prices, making it challenging for many potential buyers to afford a home.

Data from Redfin reveals that for the four weeks ending on January 26, the average home that went under contract spent 54 days on the market, the lengthiest period since March 2020. This is an increase from the 47 days recorded during the same period the previous year and significantly higher than the 35-day average noted in early 2022 during the housing boom triggered by the pandemic.

Moreover, the report highlights a rise in housing supply, with 5.2 months of inventory available on the market, the most since early 2019. A larger supply typically signifies a buyer’s market, providing buyers with increased bargaining power.

Affordability continues to be a significant obstacle, with mortgage rates remaining close to 7% and home prices climbing by 4.8% year over year. The median monthly mortgage payment has now reached $2,753, nearing the previous record high in April 2024. The merging of high borrowing expenses and elevated home prices has resulted in a sharp 9.4% decrease in pending home sales compared to the previous year, marking the most severe plummet since September 2023.

Extreme weather conditions, including severe winter storms in the Midwest, South, and Northeast, in addition to wildfires in Southern California, have also contributed to a decline in buyer activity.

However, despite the existing conditions, the housing market may experience an uptick in activity in the near future as mortgage rates slightly decrease and new listings grow, according to Redfin. Several Redfin agents have indicated that buyers who have been awaiting reductions in prices and interest rates are now entering the market.

Although some markets, such as San Francisco and Austin, are observing price drops, others like Pittsburgh and Milwaukee have experienced double-digit percentage rises in median sale prices. Furthermore, new listings have surfaced in various metro areas, including San Jose, Phoenix, and Seattle.

Given these recent findings, it is evident that the housing market is undergoing a transformation, potentially leading to an upturn in the coming weeks. The outlook remains hopeful as buyers are gradually adjusting to the current market conditions and are starting to make their move into the real estate space once again.