Housing Market Rebounds as Mortgage Rates Fall
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What is the main topic discussed in this episode?
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Here's your Money Briefing for Monday, February 6th.
How have mortgage rates changed since last fall and why does that matter?
I'm J.R. Whalen for The Wall Street Journal. After a red-hot run in 2021, the housing market skidded to a crawl last year as mortgage rates jumped to around 7%, keeping buyers on the sidelines and pushing prices significantly lower. But rates have gone down in recent months, and in 2023, we're seeing signs of a rebound.
What early signs show the housing market is rebounding in 2023?
Mortgage applications are up by about a quarter since the end of last year. Pending home sales, which is a measure of signed real estate contracts, it rose in December after about six months of declines.
So is this just a blip or part of a trend toward a housing market recovery? Ben Eisen is part of the WSJ's banking and finance team that tracks the housing market. We'll check in with him after the break.
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Which housing indicators (mortgage applications, pending sales, Redfin contacts) are improving and by how much?
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Mortgage rates have roughly doubled compared to a year ago, but they've come down a full percentage point. And that's brought some new buyers into the market and stirred up demand in a housing market that went into a slump last year. So what does this activity mean for the economy? And are we out of the woods? WSJ reporter Ben Eisen has been keeping close tabs on the housing market, and he joins me now. Hey, Ben, thanks very much for being with us.
How is the 30-year fixed mortgage rate determined and what made it fall recently?
Thanks for having me. So, Ben, what does the housing market tell us about the broader economy?
The housing market is really an early indicator of how the economy is kind of responding to everything that's happened in recent weeks. We've seen a strong loosening of financial conditions. We've seen stocks and bonds rebound to start the year. And, you know, there's this sort of widespread belief that inflation is coming down. And at the same time, the U.S. isn't going to kind of go into a deep recession as a result. And that's kind of bringing back a lot of activity that we had seen go away when rates were rising.
Now, last fall, we saw mortgage rates hit their highest level since 2002, but they've been ticking lower in the weeks since. What kind of activity in the housing market are we seeing as a result?
So we're seeing a number of indicators start to kind of bounce from the lows that they have hit recently. Mortgage applications are up by about a quarter since the end of last year. Pending home sales, which is a measure of signed real estate contracts, it rose in December recently. after about six months of declines. And one real estate brokerage, Redfin, says that the number of people contacting their agents to start the buying process has also kind of bounced from a November low. So you have all these measures that suggest not that we're kind of returning to the boom times of 2021, but the freefall that we'd seen in the housing market over the last year or so, maybe it has hit some sort of bottom.
By the way, the rate we talk about all the time is the 30-year fixed mortgage rate. How is that rate set and what would cause it to, in this case, fall?
The 30-year mortgage rate, it tends to track the 10-year treasury yield.
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Chapters
8 chapters
1
What is the main topic discussed in this episode?
0:00–0:38
2
How have mortgage rates changed since last fall and why does that matter?
0:38–0:57
3
What early signs show the housing market is rebounding in 2023?
0:57–1:34
4
Which housing indicators (mortgage applications, pending sales, Redfin contacts) are improving and by how much?
1:34–2:17
5
How is the 30-year fixed mortgage rate determined and what made it fall recently?
2:17–4:09
6
Should we be cautious about the rebound given the Fed’s commitment to high interest rates?
4:09–6:10
7
How are home prices and sales behaving differently during this market shift?
6:10–7:30
8
How have lower mortgage rates affected refinancing and buyers’ expectations for monthly costs?
7:30–8:17
Speakers
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