Housing Market Sees More Sellers as Rates Ease, but Shutdown Shadows Buyer Optimism

Mortgage interest rates dipped for the fourth week in a row, and it's pushing sellers to enter the housing market.

New listings were up 5.9% last week compared with the same period a year ago, extending the streak of accelerating growth to three weeks, according to the Realtor.com® Weekly Housing Trends report.

Mortgage rates are now 6.17% for the week ending Oct. 30, according to Freddie Mac. Realtor.com economists have found that with 30-year fixed mortgage rates easing to their lowest level in over a year, many homeowners who have been waiting on the sidelines may be ready to test the market—particularly those hoping to sell before the end of the year.

"After being locked in by high mortgage rates over the past year, many homeowners have been reluctant to sell and give up their low-rate loans," explains Jiayi Xu, economist at Realtor.com. "Now, as rates begin to ease, more buyers are reentering the market—and sellers who also need to buy finally have a chance to make a move."

The lower rates are an encouraging sign for buyers, but at the same time, the government shutdown hangs over people considering a big purchase. Concerns over job security, including the recent rounds of layoffs at several major companies such as Amazon, can weaken consumer confidence in the near term.

The Consumer Confidence Index, which measures U.S. consumers’ views on personal finances and the economy, declined in October, according to the report.

To strengthen purchase sentiment, meaningful wage growth and greater financial stability will be essential, according to Realtor.com economists.

"A government shutdown could slow the processing of government-backed loans such as FHA, VA, and USDA mortgages, creating additional hurdles for qualified buyers," explains Xu. "But the larger impact may be on buyer sentiment overall.

"Until confidence in the broader economy improves, many may choose to pause their home search despite lower rates."

Home listings increase

Active home listing inventory increased 14.6% year over year—this marks the 103rd straight week of annual gains in inventory.

It amounts to about 1.1 million homes for sale last week—the 26th week in a row over the million-listing threshold. Economists found that active inventory is growing faster than new listings, which points to more homes sitting on the market longer.

But as more homes continue to be listed, it also means all of that inventory is sitting longer on the market—this is the case compared to a year ago.

The median time on the market held at 63 days this week—about as long as it took to sell a home before the COVID-19 pandemic.

As homes continue to sit longer, more sellers are cutting their asking prices in hopes of closing a deal before the end of the year.

That's in addition to median list prices already remaining flat compared to the same time a year ago. The national median list price is $424,200. The price per square foot also fell 0.8% year over year after growing steadily for almost two years. The decrease in the price per square foot marks a drop for eight weeks in a row.

The report cites that weak sales activity has finally caught up and shaken underlying home values despite stable prices.