Mortgage Rates Dip Further—So Why Are Home Prices Still So High? The ‘Sticky’ Problem, Explained

'Sticky' Home Prices

Photo-Illustration by Realtor.com / Getty Images (2)

With Thanksgiving behind us and much Christmas merriment ahead, one might presume that home shoppers have shelved their house hunt until the new year. But no, the housing market is as hopping as ever—and even full of surprises of late.

“Housing data in the week that includes the Thanksgiving holiday show that the housing market continues to evolve, but not always as expected,” explains Realtor.com® Chief Economist Danielle Hale in her weekly analysis.

In our column “How’s the Housing Market This Week?” we’ll break down what’s happening with the latest real estate statistics, and what it means for homebuyers and sellers.

Home price growth ticked up

In November, home prices hovered at a national median of $417,000, down from June’s record high of $449,000. And although home prices have been growing by double digits year over year for 48 straight weeks, that growth has been tapering off.

Yet for the week ending Nov. 26, home price growth resurged, with prices 12.2% higher than this same week a year earlier. (In the previous week, the growth rate was just 11%.)

“Growth in the typical asking price of homes picked up from last week for the first time in seven weeks,” Hale notes, but suspects this is likely to be an “aberration.”

Nonetheless, she says, “It’s a reminder that prices can be sticky.”

“Sticky,” it turns out, is a technical term economists use “to describe variables that are resistant to change, particularly when that change is to the downside,” according to Hale.

So just how sticky are home prices? And will they remain stuck for long?

“We noted a few weeks ago that home price growth could move back into single-digit territory just before the end of the year,” explains Hale. “It’s still possible that we’ll see that trend materialize before the end of the year. But this week’s data is a signal that single-digit home price growth may not be seen before the new year.”

What’s not stuck? Mortgage rates

The housing market has been red-hot for the past several years, but rising mortgage rates have recently pumped the brakes, nearly doubling over the past year and spiking in late October to a 20-year high of 7.08% for a 30-year fixed-rate loan.

Yet since then, rates for a 30-year fixed have been on a downward trend for the third week in a row, averaging 6.49% for the week ending Dec. 1, according to Freddie Mac.

But will these lower mortgage payments spur any buyers to make an offer? Probably not.

“This boost in affordability hasn’t yet been enough to draw in more existing homebuyers,” says Hale. Plus, even if rates are down, they could shoot back up again, and this unpredictability makes planning a challenge. It’s prompting many homebuyers to sit on the sidelines and wait until things settle down.

Listings continue to rise

The number of homes that buyers have to peruse continues to grow ever larger, increasing an astounding 53% above one year ago for the week ending Nov. 26. Yet many home shoppers will find that pool simply contains the same stale listings.

Sure, many sellers were on vacation last week and likely not thinking of listing their homes during a long holiday weekend. Yet the issue of rising active listings runs deeper than that.

New listings also plunged 17% for the week ending Nov. 26 compared with last year. This latest drop marks a grim milestone for buyers: It’s the 21st consecutive week of year-over-year declines in homeowners listing their homes, according to Hale.

“While conditions remain favorable for sellers, with home prices high and homes still selling relatively quickly, the affordability strain for buyers is weighing on seller confidence,” Hale explains.

And so what’s a frustrated buyer to do?

Some are looking to new construction to find the types of home features missing on the dusty listing pages.

“In fact, new home sales picked up slightly in October,” says Hale.

What increased days on market means for buyers and sellers

A typical property spent an extra week on the market, for the week ending Nov. 26. This marks an 18-week run with homes lingering longer compared with last year. (The average number of days a home spent on the market in November was 56.)

Homes lingering on the market means home shoppers have an advantage—even though in general homes are selling faster than before 2019.

But all in all, “Buyers are closer to the driver’s seat in the housing market than they’ve been in a long time,” says Hale.

And so sellers looking to close a deal before the end of the year should take a close look at their local market before pricing their homes too high.

“Even though housing markets are generally cooling, lower-priced markets in the Northeast and Midwest are seeing homes sell faster than in other areas,” says Hale.

The post Mortgage Rates Dip Further—So Why Are Home Prices Still So High? The ‘Sticky’ Problem, Explained appeared first on Real Estate News & Insights | realtor.com®.

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