The housing market has begun to recover after hitting a low point in the second week of November, according to a new report from Redfin. The number of Redfin customers requesting tours has improved 17 percentage points from November, and the number of people contacting Redfin agents to start the homebuying process has improved 13 points. Compared with a year ago, home tours and requests for service are down 23% and 27%, but that’s an improvement from the November trough, when both were down 40%.
This is already translating into more home sales. Redfin agents report that bidding wars are back in some markets, including Seattle, central Florida and Richmond, Virginia. Homebuyer demand remains down from its early 2022 highs, but the market has shifted into a new phase and well-priced listings are selling quickly.
Homebuyers Return as Power Dynamics Shift Toward Their Favor
Homebuyers have begun to acclimate to 6% mortgage rates, which may feel like a relief after watching affordability erode as rates surpassed 7% in the fall.
“I’ve seen more homes go under contract this month than in the entire fourth quarter. Listings that were stagnant in November and December are suddenly getting one to two offers,” said San Jose, California Redfin agent Angela Langone. “I’m getting texts and emails from prospective buyers now that the new year is in full swing and the holidays are behind us. Mortgage rates aren’t stopping people as much as they were at the end of 2022 now that they’re down from their peak and sellers are more willing to negotiate. Some buyers are having luck winning a home for under asking price, especially if it has been on the market for several weeks, but those days may be numbered.”
Mortgage applications are up 28% from early November as the average 30-year-fixed mortgage rate has declined to 6.15% from its November peak of 7.08%—the largest 10-week decline since 2009. That has sent the typical homebuyer’s mortgage payment down 10% (about $180) since fall. Pending home sales rose 3% in December from November on a seasonally-adjusted basis—the first month-over-month increase in 14 months.
Bidding Wars Are Back in Some Markets
While demand is coming back in some parts of the country, homes that are eliciting bidding wars tend to be affordable, suburban, single-family, move-in ready, and priced competitively. Preliminary data on the share of Redfin agents’ offers facing bidding wars points to small upticks in the Seattle and Tampa markets this month.
“Bidding wars are back in Seattle,” said local Redfin real estate agent Shoshana Godwin. “One of our Issaquah listings got 12 offers and is under contract for $155,000 over the $1.4 million list price. The buyer waived every contingency, handed over $300,000 of earnest money and is letting the seller stay for free for two months after closing. Another home in Seattle’s popular Ballard neighborhood was recently delisted after sitting on the market for over three months. The seller relisted it last week and it went pending in under a day.”
Eric Auciello, Redfin’s team manager in Tampa, has seen three modest single-family homes priced around $300,000 wind up in bidding wars in central Florida this month, with 16, 17 and 23 competing offers.
“Homes that are in desirable school districts, priced well and in good condition are going off the market within days or even hours,” said Richmond Redfin agent Blake Edwards. “Anything under $400,000 will sell within the weekend. Even the $1 million houses that are in great condition are selling within days. It really is property specific right now.”
The Market for Condos and Expensive Homes Lags Behind
Condos and higher-priced homes are still a struggle to sell. Redfin agents report that sellers of expensive homes and condos are offering buyers incentives to close deals.
“The condo market in Washington, D.C. has been hit hard,” said local Redfin agent Marshall Carey. “Condo sellers are searching for ways to incentivize buyers. One of my buyers recently purchased a condo, and we got the seller to give them 3% of the list price back in cash. My buyer used 2% of that to buy down their mortgage rate.”
“There’s a ton of demand for affordable suburban homes, but the super high end isn’t in demand,” said Chicago Redfin agent Dan Close. “Property taxes are very expensive here, so buying a $2 million home isn’t practical for most people.”
Sellers Have Been Slower to Return Than Buyers
Even though homebuyer demand is improving, the main factor driving bidding wars is low inventory. Would-be sellers are more sensitive to elevated rates because 85% of mortgage holders have a rate far below today’s level of roughly 6%. This “lock-in” effect and still-high rental prices are motivating many potential move-up buyers to become landlords instead of home sellers.
The measure of people contacting Redfin agents to sell their home has improved slightly; it’s up 10 percentage points from the November trough. But there hasn’t yet been a significant boost in listings nationwide. New listings fell 18% year over year during the four weeks ending Jan. 22. That’s the smallest decrease in almost three months, but much steeper than the 8% decline a year earlier.
Redfin agents have observed in their conversations with homeowners that there’s fear around listing at a time when home-price growth has been shrinking and buyers are regaining power.
“Sellers are jumping on the first viable offer because they’ve heard from the media, friends, and family that the housing market is slowing,” Edwards said. “It all feels very urgent. We prioritize educating sellers in real time so they understand how the market dynamics are shifting, with more buyers now coming back.”
It is likely that the market will see more sellers return as homebuyer demand increases and price growth stabilizes—especially given that there’s pent-up supply from sellers who delisted their homes in the fall when the market was slowing.
To read the full report, including more data, charts and methodology, click here.