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Falling mortgage rates and the Federal Reserve’s recent rate cut are revitalizing the fall housing market.
A report from Realtor.com reveals a significant jump in new listings in September – an 11.6% increase compared to the previous year.
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Realtor.com economist Ralph McLaughlin attributes the surge to a three-year high fueled by the drop in mortgage rates and the Fed’s decision to cut interest rates by 50 basis points. The positive trend suggests a potential rebound in the housing market.
Following several years of a stagnant market where high interest rates deterred buyers and discouraged sellers, there’s finally a sense of movement. With more rate cuts anticipated this year, buyers and sellers feel increasingly optimistic about reentering the housing market.
“We find that the lock-in effect is easing,” McLaughlin said. “It’s likely that some sidelined buyers will return to the field as both their buying power and home choices increase.”
McLaughlin’s research revealed a significant increase in available homes in September, with 34% more listings than the previous year. This represents the most active listings since April 2020.
The increase in new listings is particularly noticeable in more expensive markets where the financial savings from lower mortgage rates are most significant. Seattle, up 41.8%, Washington, D.C., up 30.4% and San Jose, California, up 27.1%, are among the metropolitan areas with the largest growth in newly listed homes compared to a year ago.
“In fact, we find a strong correlation between the median-priced home in a market and the growth in newly listed homes compared to last year,” McLaughlin said. “We suspect this is at least partly due to the fact that homebuyers – who often are also home sellers – in more expensive markets benefit from higher nominal savings than buyers in less expensive markets.”
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Although the number of homes on the market has increased in all regions, the South experienced the most significant year-over-year growth. Compared to last September, listings in the South surged by 42%, followed by the West at 36.5%, the Midwest at 22.3% and the Northeast at 14.8%.
Several Florida cities, including Tampa, Miami and Jacksonville, witnessed booms in listings, with increases of 74%, 68.9% and 61.9%, respectively.
Despite the positive trend, listing levels remain below pre-pandemic levels.
“While inventory this September certainly continues to improve, it is still down 23.2% compared with typical 2017 to 2019 levels,” McLaughlin said.
The median price of homes for sale in September declined slightly from August, dropping from $429,500 to $425,000. However, the median price per square foot rose by 2.3%, indicating that buyers are getting less value for their money.
Since September 2019, per-square-foot prices have increased by 50.8%.
Prices experienced regional variations. The Northeast saw a 2.8% increase, while the Midwest rose by 0.6%. Conversely, the West saw a 0.2% decrease, and the South experienced a 2.3% decline.
Among the 50 largest metropolitan areas, Rochester, New York, was up 13%; Milwaukee rose 11.4%; and Cleveland rose 9.3%. In contrast, Miami dropped 12.4%; Cincinnati declined 9.5%; and San Francisco dropped 8.9%.
More sellers also are offering price cuts on their listings. About one-fifth of all listings had price cuts, slightly higher than the previous year. Despite price reductions, the overall housing market has remained relatively stable.
“While market speed moved at the slowest rate for a September since 2019, buyers have been engaged just enough to keep prices from falling, with median price per square foot rising on a year-over-year basis,” McLaughlin said.
Homes are lingering slightly longer on the market. In September, the average time on the market increased to 55 days, up from 53 days in August. This represents the slowest September in five years.
But this is still faster than the pre-pandemic pace. Between 2017 and 2019, homes typically spent an average of 62 days on the market in September.
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