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After a particularly rough stretch, the frozen housing market has begun to thaw.

Mortgage rates have tumbled, more homes are being listed, and sales are rising as buyers are pouncing on their sudden change in fortune.

“The worst is over for the housing market,” says Mark Zandi, chief economist at Moody’s Analytics. But “it will take a number of years for the housing market to fully normalize.”

Indeed, the signs of a gradual sea change have been abundant in the past two months.

Market Recap

Real estate market activity has remained slow in accordance with typical seasonal patterns. Interest rates held steady through the month of January to end at 6.69%; at the time of this publication, there was a slight decrease to 6.63%. For the Washington counties covered by the NWMLS, January 2024 saw a 3% increase in closed sales transactions year-over-year, an improvement from December 2023’s year-over-year change in closed sales transactions, which was a decrease of 11%. Overall, the median price for residential homes and condominiums sold in January 2024 was $593,500, up 6.5% when compared to January 2023 ($557,250).

Important takeaways from January’s data:

  • The median sales price increased year-over-year 19 out of 26 counties, with the highest median sale prices in King ($760,000), San Juan ($757,000) and Snohomish ($700,000). The three counties with the lowest median priced homes sold were Columbia ($235,000), Pacific ($250,900) and Grays Harbor ($305,000).
  • The volume of homes on the market has continued to decline throughout Washington with 15 out of 26 counties seeing a year-over-year decrease. There were 7,084 active listings on the market at the end of January 2024, a decrease of nearly 14% compared to January 2023 (8,220).
  • Despite the decrease in available inventory, 13 of the 26 counties in the report experienced an increase in the number of homes sold year-over-year.
  • Condominium sales jumped nearly 21% year-over-year, with 492 units sold in January 2024. The median price of condominium sales increased 7% year-over-year from $424,000 in January 2023 to $453,750 in January 2024.

For everyone who buys a house between now and February 29th, you're going to look at those people in the same way you look at people who bought houses at the beginning of covid.

“Seller reluctance has led to a continued decline in year-over-year inventory levels, an overall 14% decrease of active listings on the market,” said Mason Virant, associate director of the Washington Center for Real Estate Research at The University of Washington. “Encouragingly, year-over-year sales transactions saw a 3% improvement over January 2023. Low levels of for-sale inventory have led to increased competition amongst buyers, producing a nearly 7% year-over-year increase in median home prices across the Washington counties covered by the NWMLS.”

In December, mortgage rates dropped from above 7% to the mid-6% range—a consequential event that jump-started home sales.

Mortgage demand inches up, despite 30-year mortgage rate reaching towards 7%

The numbers: U.S. mortgage applications inched up despite rates reaching towards 7%.

Mortgage rates rose on the back of the Federal Reserve throwing cold water on market expectations that it would cut its benchmark interest rate starting in March. Yet mortgage demand was not dampened as some homeowners found comparatively lower rates attractive enough to refinance.

The overall market composite index — a measure of mortgage application volume — increased in the last week, according to the Mortgage Bankers Association (MBA) said on Wednesday. 

Key details: The purchase index — which measures mortgage applications for the purchase of a home — fell 0.6% from a week ago.

The refinance index jumped 12.3%, despite the fact that most homeowners have rates below 6%.

The average contract rate for the 30-year mortgage for homes sold for $726,200 or less was 6.8% for the week ending February 2. That’s up from 6.78% from the week before. 

The rate for jumbo loans, or the 30-year mortgage for homes sold for over $726,200, was 6.88%, down from 6.94% the previous week. 

The average rate for a 30-year mortgage backed by the Federal Housing Administration was down to 6.57% from 6.61%.

More homes are going up for sale.

One of the biggest obstacles in the housing market has been the severe shortage of homes for sale. There are many more buyers eager to find a place of their own than there is available housing.

Fortunately, more homes have been coming on the market in recent weeks. The number of active listings rose 8.6% in the week ending Jan. 20 compared with a year earlier, according to Realtor.com data.

That’s a result of homeowners deciding that it’s time for them to list their properties and get on with their lives. The lower rates of the past month likely helped to nudge them in that direction.

Builders are also doing their part. The National Association of Home Builders expects a 5.5% increase in single-family home construction this year compared with 2023.

“It looks like residential construction has bottomed out, and things are looking better this year,” says Danushka Nanayakkara, the assistant vice president for forecasting at the NAHB. “The housing market is going to stabilize.”

Home sales are revving back up again.

After several years of brisk home sales during the COVID-19 pandemic—when everyone seemed to know multiple people who purchased a home— the housing market stalled as mortgage rates rose.

Last year, there were the fewest home sales since 1995, according to the NAR. (Only existing homes were included in the tally.) More people bought homes in the depths of the Great Recession—that’s how bad it was.

“It’s likely that sales have hit the bottom,” says Hale.

Now, the tide has begun to turn. But it’s anyone’s guess how quickly it will take for the market to fully rebound.

“Things are going to get better this year,” says Nanayakkara. “Everybody is feeling optimistic.”

Since December, more homeowners have listed their properties and open houses are once again filled with eager buyers.

People are getting accustomed to not having 3% and 4% [mortgage] interest rates. They are just basically ready to move on.

These are positive steps for a housing market that stagnated for most of 2023, even if affordability remains a challenge for many would-be buyers.

The housing market will be a more normal type of year, that said, it’s still likely to be rather sluggish.

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