Home Price Growth Slows as Mortgage Rates Dip, Redfin Finds

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The median U.S. home-sale price rose just 3.5% year over year during the four weeks ending February 23–the smallest increase since September–according to a new report from Redfin, Seattle.

Mortgage rates have declined to their lowest level in more than two months, dipping from 7.13% to 6.78% in the last two weeks and upping buyers’ purchasing power by thousands of dollars. “Mortgage rates are coming down due to signals that the U.S. economy is slowing, and heightened recession fears,” the report said.

In addition to a bit of cost relief, another factor is working in buyers’ favor: House hunters have a bit more power to negotiate on sale price and terms as supply increases in some parts of the country. There are 4.6 months of supply on the market currently, up from 4 months at this time last year, and the typical home is selling for roughly 2% less than its asking price.

There are signs that slowing price growth, declining rates and more favorable conditions are bringing some house hunters back to the market. Redfin’s Homebuyer Demand Index jumped to its highest level since the start of the year, and Google searches of “homes for sale” nationwide have hit their highest level since September.

But home sales have yet to improve. Pending home sales are down 6.2% from a year earlier, in line with decreases Redfin has seen since the start of the year. “Even though mortgage rates have declined a bit, the typical monthly housing payment is just $32 shy of its all-time high,” Redfin said. “Sales could pick up in the coming weeks if the increase in home tours turns into more offers and/or mortgage rates continue coming down slightly.”

Redfin agents in some parts of the U.S. are advising prospective buyers to jump in while they can because with today’s economic and political uncertainty, mortgage rates could rise above 7% again soon. And the pileup of supply could soon be depleted: New listings of homes for sale are up just 2.4% year over year this week, the smallest gain in a month.

Sacramento Redfin agent Alison Williams said sha advises potential buyers, “If you’re thinking of purchasing a home in the next six months, don’t wait until the flowers start blooming. The market will heat up as we get closer to spring.”