Weekly Real Estate Monitor for Feb. 26 - Mar. 1

by Lukasz Kukwa

This week, mortgage interest rates trended downward slightly but still continue to be above 7%, starting the week at 7.13% and at 7.08% as of today. Although still lower than the rates observed in the fall of 2023, this development dampens enthusiasm among buyers looking to enter the spring market. It is noteworthy that this housing market is distinctive, with 32% of buyers opting for all-cash purchases, possibly influenced by substantial gains in housing equity.

If this trend continues, it may create disadvantages for first-time buyers, who are typically more sensitive to prices, as the increase in mortgage rates could potentially price them out of the market.

Existing-home sales in January 2024 bounced back to reach 4 million

The National Association of Realtors (NAR) published a report on existing-home sales data, revealing that housing market activity in January surged by 3.1% compared to December 2023. January's existing-home sales achieved a seasonally adjusted annual rate of 4 million, marking a 1.7% decline from January 2023.

By the end of January, unsold listings increased by 2.0% from the previous month, totaling 1,010,000 homes for sale. Inventory levels were up by 3.1% compared to January 2023, with it taking approximately 3 months to clear the current inventory at the current sales pace. Homes took around 36 days to go from listing to contract in the current market, slightly longer than the 33 days it took a year ago.

All-cash buyers has reached its highest level since 2014, accounting for 32% of all buyer

While mortgage interest rates have increased from their historic lows in recent years, the number of all-cash home buyers has notably increased in recent months. Since October 2022, buyers who purchased their homes without financing, have accounted for over a quarter of the real estate market. As of January 2024, all-cash buyers now represent 32% of home sales, marking the highest level since June 2014. These home buyers primarily consist of vacation buyers and investors based on data from the REALTORS® Confidence Index over the last six months. However, primary residence buyers are also actively engaging in all-cash purchases.

For primary residence buyers, all-cash transactions or larger than 20% down payments have seen a rise over the past two years. These buyers typically sold their previous homes and used the proceeds to purchase their next property without a mortgage or borrowing a smaller amount. This ability to make cash purchases is often attributed to the substantial housing equity they have accumulated as property values have surged in recent years. In 2003, only 10% of repeat primary residence buyers could afford an all-cash purchase, compared to 26% in 2023. This trend is less common among first-time buyers, although there was a slight increase from 4% in 2003 to 6% in 2023.

Apart from housing equity, another factor enabling primary residence buyers to make all-cash purchases is their tendency to relocate over long distances. All-cash primary residence buyers typically move a median distance of 60 miles, with nearly a third relocating 500 miles or more. In contrast, among those who financed their home purchases, only 16% moved over 500 miles, with a median distance of just 18 miles. Long-distance moves have remained prevalent, especially among retirees and individuals with remote work flexibility. With home prices projected to continue rising in 2024 due to limited inventory and high demand, all-cash buyers are expected to remain prominent in the market as homeowners accumulate more housing equity.

In January, the average home received 2.7 offers, indicating a competitive market where all-cash buyers may have an advantage in bidding wars over those relying on financing.

Weekly Highlights:

New listings have increased for the fourth consecutive week.

The week ending on February 25, there was a rise of 6.9% in new listings compared to the same period last year.

The median time to contract interrupts the declining pattern.

This marks the fourth week in a row where new listings have surpassed the previous year's numbers, indicating a positive trend in inventory growth.The decline in the median time to contract has been interrupted. Homes are now taking one day longer to sell compared to the previous week, breaking a six-week downward trend.

The median list price in falls.

Despite this change, the current median time to contract is still two days quicker than it was at the same time last year. In comparison to the previous year, there was a 2.5% decrease in the median list price from the preceding week. Nonetheless, the median list price remains higher than last year, with a 5.3% increase observed across the region.