This weekend only, get a Marketplace zip–up hoodie when you donate $8/month. Don’t wait — this offer ends at midnight Sunday!
The once nearly frozen housing market from late 2022 is starting to thaw every so slightly. The National Association of Realtors’ Pending Home Sales Index shot up 8.1% in January, the second straight month of gains.
The total number of existing homes on the market is also improving, but by historical measures, it’s still unusually low.
That tight inventory is bad news for would-be homebuyers, but decidedly good news for homebuilders. With all the headaches of moving, from renting a truck and fumbling with packing tape, there’s another huge reason homeowners who refinanced during the pandemic housing boom are not moving.
“Over 80% of current homeowners now have a mortgage rate under 4%,” said Rafe Jadrosich, who covers the homebuilding industry for Bank of America. This makes the prospect of having to finance at today’s rate of 6.5% on a 30-year-fixed loan not so enticing.
“The incentive for existing home inventory to come on the market is really low right now. So, we’d expect existing home sales remain under pressure in pushing more people into the new home market,” Jadrosich said.
The homebuilder Toll Brothers reported new home sales last month were better than January sales for most of the last two decades. New homes are gaining popularity partly because the cost of fixing up a fixer-upper keeps rising, according to Jessica Lautz at the National Association of Realtors.
“41% of people who purchase a new property are actually doing so because they want to avoid the renovations,” she said.
Even with homebuilders benefiting from low inventory now, they’d much prefer to see lower mortgage rates. Demand would be much higher for both new and old homes.
Plus, with rates so high now, many of the people buying brand new homes are those that don’t have to borrow in the first place.
“Generationally, that buyer is going to be a Gen Xer who’s in the peak earning years,” said Rob Dietz of the National Association of Homebuilders. “It’s going to be a baby boomer who maybe can purchase with all cash.”
But how long can first-time homebuyers live in a fixer upper without fixing it up?
There’s a lot happening in the world. Through it all, Marketplace is here for you.
You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible.
Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.