Weekly Real Estate Monitor for Jan. 29 - Feb. 2

As expected, the Federal Reserve opted to keep its short-term federal funds rate interest rate unchanged on Wednesday, maintaining it at 5.375%. However, the Fed hinted at the possibility of implementing several cuts later in the year in anticipation of its future policy. Based on this decision the bond market, including mortgage-backed securities, has already driven down longer-term interest rates.

It's worth recalling that before the economic lockdown induced by COVID, the Federal Funds Rate stood near 2%, and 30-year fixed mortgage rates were nearly 4%. We shouldn't anticipate a return to these levels this year or the next as the persistent high budget deficit and elevated inflation metrics suggest that mortgage rates will likely hover in the 6% to 7% range for most of the year.

While this rate is lower than the recent peak of 8% a few months ago, it contributes to improved housing affordability and is expected to draw more homebuyers back into the market. Additionally, many postponed home sellers may now be inclined to forgo the expectations of rates between 3% and 4% due to changes in life circumstances, potentially boosting inventory with home sales expecting to see an upswing this year.

Weekly Highlights:

Contracts have experienced a decline from the previous year.

The disparity between the new contract figures for this year and those of the same week in the previous year has continued to expand, witnessing a decrease of 12.9% in new contracts. Inventory may be part of the problem as there are fewer homes available to present contracts on.

Contract durations resemble those of 2023.

The median time to secure a contract for this week was 24 days, demonstrating a slight acceleration of one day compared to the preceding week. In comparison to the corresponding week last year, the median time to contract remains unchanged. As we approach the spring buying season, the median time is expected to decrease, although the market's pace may vary from the previous year based on the speed at which buyers and sellers respond to lower interest rates.

New listings are rebounding from the wintry conditions.

A 6.0% decrease from the previous year, they have significantly recovered from the impact of last week's winter weather, showcasing a 5.2% improvement.