Would-be homebuyers are once again coming out of hibernation, this time prepared to strike a deal before competition heats up.
The volume of applications for a mortgage increased 9.9% from one week earlier on a seasonally adjusted basis for the week ending Jan. 10, according to the Mortgage Bankers Association (MBA). Some of that activity was driven by purchase applications, which increased 6% from the previous week, as buyers capitalized on the year-end decline in rates and a small boost in inventory levels.
For rate-sensitive buyers who have been waiting on the sidelines, these first few weeks of the year could offer a window to purchase, experts said. Still, any relief in affordability could be short-lived.
Bidding wars are already erupting in some areas of the US, which could drive up home prices among the few attractive listings. Additionally, new economic data this week could sway the Federal Reserve to postpone its planned rate cuts — keeping rates higher for longer.
“Prices here are all over the board. If your house is updated with the most recent home trends, you’re going to get offers,” St. Louis-based Stayce Mayfield, a Redfin premier agent, told Yahoo Finance. “We’re still getting bidding wars with anywhere from 20-30 offers — though it still depends on the location and condition.”
Mayfield added, “Some of our buyers agents are still experiencing multiple offers and struggling to get their clients in a home.”
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Where bidding wars are erupting
As the new year kicked off, more buyers trickled into the housing market.
According to Redfin, mortgage-purchase applications were up 3% compared to a month ago during the first week of January. Redfin agents also reported requests for tours were up 5% from this time in December, and there were 9% more new listings on the market in the four weeks ending Jan. 7 compared to a year ago.
“Right now, I think the majority of our agents all over the country expected to have a busy first few weeks in January given consults,” Redfin spokesperson Allison Braun told Yahoo Finance. “However, given the storms that are pushing through the country [that’s] really leaving potential homebuyers at home and on the sidelines.”
By contrast, areas with good weather saw an uptick in activity. One Redfin agent in Phoenix noted an unusual uptick in activity this week.
“Telling my buyers to get in the market now, interest rates are lower and competition is low,” said Phoenix premier agent Heather Mahmood-Corley. “I imagine competition will really pick up in March and prices will start to soar. March really is a hot month here, the weather starts to get better.”
The uptick in competition, though, could erode that newfound affordability. According to Redfin, at least 24% of homes sold in the four weeks leading up to Jan. 7, sold above list price. On average, the median price of homes sold was $363,125, up 4.1% year over year.
Meanwhile, South Carolina-based president of Home Loans Inc. Jason Sharon, also noted a pickup in bidding wars in Charleston, S.C. — as well as in Atlanta and Huntsville, Ala. Some of those buyers may also have been lured into the market by the influx of new listings.
“I am already seeing bidding wars in cities with good job markets,” Sharon told Yahoo Finance. “Generally, they are houses in good condition, at or below the median price point. If mortgage rates continue their slow decline, I believe we will see more buyers enter the market, causing even more bidding wars.”
Buyers were also picky about where they put their money.
“No one wants to do a fixer upper right now, unless it’s in a really desirable neighborhood and the price is right,” Mayfield said. “I was working with a first-time homebuyer recently. We put in six offers (in the 200 range) and all the houses we put offers on kept losing. One of the houses we put an offer on had 33 other offers.”
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‘Demand will depend on mortgage rates’
Though competition has seemingly begun to pick up in some segments of the US, mortgage rates could destabilize that momentum.
“Demand in the market, especially from first-time buyers, will likely depend a good deal on what happens with mortgage rates,” Nicole Bachaud, Zillow senior economist, told Yahoo Finance. “As it looks now, rates are likely to stay down from the 8% peak.”
Within the last three months, mortgage rates have plunged more than a full point to a low of 6.62% the week ending Jan. 4.
The dip in rates saved potential buyers an…
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