Although the reports on home price indexes for December are relatively old at this point, they may be a harbinger for the broader housing market as the spring buying season approaches. When taken in context with the numbers for home sales in January and pessimism in February from homebuilders, signs of firming in home prices indicate that homebuyers are having to compete more for available units. This has a negative impact on home affordability at a time when home prices are elevated and often beyond the means of moderate income households.
Critical to the housing market in the coming months will be if mortgage rates fall and stay down enough to motivate homebuyers. The Freddie Mac weekly average rate for a 30-year fixed rate mortgage is down to 5.98 percent as of February 26, the lowest since 5.89 percent in the September 8, 2022 week. This is low enough to encourage current mortgage holders at higher rates to refinance. The question is if it is enough that holders of mortgages with the record low rates seen in the post-pandemic period will be willing to put their homes on the market to increase supply? If so, escalation in prices will be more normal. If not, prices may keep many potential buyers from purchasing as the supply of sought-after units remains lean.
