Lowered mortgage rates spur hope for buyers, but rising prices still limit activity

Mortgage rates fell to their lowest level since February 2023 last month, but the cut did not spark much movement in homebuyer demand, according to the latest data from Northwest Multiple Listing Service (NWMLS). Its report for September showed year-over-year (YoY) gains in both new and total active listings, pending sales and closed sales. Prices also rose, crimping affordability for many would-be buyers.

September’s completed transactions were valued at nearly $4.6 billion, with single family homes accounting for nearly $4.2 billion of that total.

Both King and Kittitas counties registered YoY gains in listings and closed sales. Pending sales and prices also increased in King County, while in Kittitas County pending sales matched year-ago levels but prices there dropped.

In its report, NWMLS said the further reduction of interest rates in September “provided a positive end-of-summer boost to the market.”

The Federal Reserve cut the benchmark interest rate in mid-September by half a percentage point as inflation slowed, a pivot that lowered rates from a two-decade high. In doing so, Jerome Powell, the Fed chair, commented on housing, saying the lack of supply (which is outside the Fed’s control) is a real, long-term problem. One industry-watcher noted mortgage lenders had already priced in an expected cut.

Other observers cautioned housing affordability would remain out of reach for many potential buyers without deeper cuts in rates. “Interest rates remain over double what they were just three years ago (6.08% at the end of September compared to 3.01% at the same time in 2021). This continues to have a major impact on affordability,” said Steven Bourassa, director of the Washington Center for Real Estate Research at the University of Washington. He does not expect any notable surge in sales “without some significant improvement in affordability.”

Northwest MLS reported a 31.4% increase in the total number of properties listed for sale year-over-year, with 22 of the 26 counties in the report experiencing a double-digit jump.

Pending sales rose 13.51% system-wide, with fifteen of the counties notching double-digit gains.

There was a modest, 1.85%, increase in closed sales in September compared to the same month a year ago. Only 11 of the 26 counties had a year-over-year increase.

The median sales price for homes and condos that sold in September was $635,000. That marked an increase of 5.8% when compared to September 2023 when the median price was $600,000. The three counties with the highest median sales price were King ($859,995), San Juan ($829,000), and Snohomish ($760,000).

For sales of residences excluding condos, the median price was $650,000, led by King County at $950,000. In Kittitas County, the median price of a single family home that sold last month was $465,000.

The multiple listing service said the number of property showings remained steady based on data from NWMLS-provided software. There were 119,900 showings last month, up from the August figure of 119,927.

An analysis of nationwide housing statistics by Redfin revealed only 2.5% of homes in the US changed hands through the first eight months of 2024. That is the lowest turnover rate in at least three decades, Redfin noted, adding the data underscores just how much the housing market has stalled in 2024. The company pointed to the combination of record-high home prices and elevated mortgage rates as the culprit for sluggish activity.

An estimated 25 of every 1,000 homes were sold between January and August. That’s about 37% fewer homes that sold when compared to 2021 (during the pandemic when rates fell to historic lows) and 31% fewer than the same timeframe in 2019.

Chen Zhao, Redfin’s senior economist, said a market where 30 to 40 of every 1,000 homes changed hands would signify a healthier housing landscape.

Zhao pointed to the “lock-in effect” as a factor for this year’s “historically lethargic home sales.” Most of the homeowners who locked in their mortgage rates are reluctant to list their homes for sale since doing so would presumably require them to buy a new home at a much higher rate, she explained. An estimated 60% of current mortgages have interest rates at or below 4%, according to the Consumer Financial Protection Bureau.

“It may be a five-to-10-year-long slog before you get back to a housing market that starts to resemble what we’ve had in the past,” Zhao told CNN.

Based on recent inflation data, Zhao said she expects the Fed to remain on a path towards a 25 bps rate cut at their November 7 meeting. “Much depends on the November 1 jobs report. Ultimately, economic data trumps both market expectations and Fed projections in determining the path of mortgage rates,” she stated.