LDN - Business

Falling mortgage rates may be prompting more homeowners to sell, boosting inventory for buyers

[October 10, 2024] By ALEX VEIGA

LOS ANGELES (AP) — Homebuyers in Seattle, Silicon Valley and the nation's other priciest markets may soon see some relief as falling mortgage rates prompt more sellers to list their properties.

The number of newly listed homes for sale climbed 4.2% last month, according to data from Realtor.com. September's jump was the biggest annual increase since the peak of the spring homebuying season, and helped lift active listings 34% from a year earlier, according to Realtor.com.

A dearth of properties for sale is one reason keeping the median U.S. home sale price near record highs. The median U .S.home sale price hit an all-time high in June at $426,900.

Last month, the Federal Reserve announced its first interest rate cut in more than four years and signaled more cuts to come this year and through 2026.

While the Fed doesn’t set mortgage rates, its policy pivot cleared a path for mortgage rates to generally go lower.

“Sellers, especially those who are locked into a low rate, have been waiting for market conditions to change,” said Danielle Hale, chief economist at Realtor.com. “Now that we’re seeing mortgage rates down to their lowest levels in two years, there are signs of movement, with more sellers putting homes on the market, even in what’s typically a real estate shoulder season.”

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Lower mortgage rates boost home shoppers’ purchasing power. They also can make selling a home more palatable for homeowners with mortgages that have a fixed rate below current prevailing rates.

The most expensive markets in the country drove much of the increase in newly listed homes last month. That includes metropolitan areas around Seattle, San Jose and Washington D.C., Realtor.com found.

Even so, homeowners who can afford to hold off on selling are likely waiting for rates to come down a lot further than they already have.

Consider, as of the second quarter, about 84% of all outstanding mortgages had a rate below 6% and 56% had a rate below 4%, according to Realtor.com.

Hale expects the average rate on a 30-year home loan to stay around 6% through the end of this year. A year ago, the average rate hit a 23-year high of 7.79%, according to mortgage buyer Freddie Mac.

September marked the 11th month in a row with an annual increase in active listings and the highest number of properties on the market since April 2020. The pickup in home listings is good news for the housing market, which has been in a sales slump for more than two years, partly due to a shortage of homes for sale.

Despite the September surge in new listings, the inventory of homes on the market remains below pre-pandemic levels. Active listings were down 23.2% last month compared to September 2019 and new listings were off 11.8%, according to Realtor.com.

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