Now that mortgage rates are down from their peak, buyers are flocking back to the U.S. housing market – but whether the upward trend in activity will continue is still up in the air.
According to realtor.com, real estate agents are reporting an influx of mortgage applications and open house attendees across the country. The most desirable homes on the market are even starting to get multiple offers, spurring the return of bidding wars.
But even with rates down from their peaks and a recent increase in activity, it’s not all smooth sailing. Despite a boost in consumer confidence, buyers are facing inventory shortages and the looming threat of interest rate unpredictability. The return of bidding wars also poses affordability challenges as competition drives prices back up.
Experts warn this surge in activity might not mean a total turnaround for the market just yet.
“What we’re seeing are the seeds of a potential spring thaw,” George Ratiu, senior economist for Realtor.com said. “Just because we’ve had a couple weeks of positive news doesn’t mean the market is roaring back yet.”
On Wednesday, interest rates rose from just below 6 percent to 6.43 percent. The change adds approximately $100 per month to the typical mortgage payment, (assuming the buyers put 20 percent down on a $400,000 home) – meaning savings for buyers are disappearing quickly with every rate increase.
“February is going to be interesting to see what happens because of the rate movement,” said Devyn Bachman, senior vice president of research at John Burns Real Estate Consulting. “Consumers like it when rates don’t change. That encourages people to go ahead and make that housing purchase.”
Homebuying activity tends to increase during the spring, so the true test of whether market activity will continue to trend upward will likely begin in March. But according to most market-watchers, mortgage rates will be the deciding factor.
