Pending home sales increased 2% in February, according to the National Association of Realtors (NAR). Realtor.com senior economist Joel Berner joins Wealth to provide insight into the state of the housing market.
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We have some new housing data out today, pending home sales rising 2% compared to the month prior, according to the latest data from the National Association of realtors. But despite that rise, the NAR says contract signing remains well below normal historical levels. Joining me now, we've got Joel Burner, who, Burner, who is a senior economist at Realtor.com. Joel, good to see you. Thanks so much for hopping on Yahoo Finance with us. First, just take us own, take us into this home sales rise that we saw during the month of February, and any continuity you're expecting.
Hi, Brad. Thanks for having me this morning. Yeah, we saw in February a pickup from January, which is a pretty slow month in terms of pending home sales, and a year-over-year increase as well from last February. So this is good news, and what we're really seeing is a bit of price softness in the market and more buyers taking advantage of that. We're seeing median listing prices fall a little bit, price reductions increase, and time on market increase as well. So it's a good time for buyers ahead of the spring buying season.
Switching gears slightly. You have a new report out about the persistent trend of bigger down payments. What are you finding there?
Yeah, what we're seeing is that down payments are increasing both in dollar value and as a percentage of the sale price. Uh, in the fourth quarter of 2024, it was the highest fourth quarter we've seen for down payments ever in the history of the data series. So why that is, is because we've got higher mortgage rates, and people are savvy, trying to minimize the amount of their home purchase that they have to finance, trying to do as much of it with cash as possible to avoid these mid to high six percent mortgage rates. And what we're really seeing also is more sales on the higher end of the market. Uh, people who are in the move-up space rather than the first-time home buyer space, so people who have equity from a previous home or using that toward a larger down payment and ending up financing less of their purchase.
Okay, so that's what I was going to follow up with, because it's a range of sales that we're talking about here too, where at the higher end versus at the lower end, there's kind of like that balancing out. And I guess are you saying that you're seeing a lot of the bigger down payments due to the higher priced homes being sold? And and what does that tell you about the state of lower income buyers? Are they, dare I say, locked out of the market, or at least blocked out?
Yeah, so the higher dollar value is partially due to a higher percentage of the sale price and also because the sale price is a little bit higher. We just saw that in the Case Shiller index, which came out earlier this week. Um, so more expensive homes are being sold, so there are larger down payments on them, and the folks who are buying those homes tend to have owned a home already and can convert that equity into cash for a down payment. I I wouldn't say that lower uh end buyers are totally locked out right now, but they are bearing the brunt of this high mortgage rate environment. It's tougher without any equity in a previous home to convert into a down payment, uh, to buy a new home and finance a lot of that at, you know, 6.7%, which is about where we're sitting right now.
So what does that mean for the average millennial or older Gen Z to afford to buy a home right now? And if not, when does that opportunity become a little bit more apparent, kind of on a on on a broad base scale?
Yeah, what we're preaching is patience for first-time home buyers right now. Uh, we've seen for the last 19 months that rents nationally have been falling, uh, in the market for new rentals. So what we're hoping is that for folks who have been able to rent for a few years and save a little bit of money, they can have a higher down payment, kind of follow this trend of larger down payments and finance less of their purchase. Uh, we don't anticipate a lot of relief from mortgage rates in the coming months. Uh, we project low sixes by the end of the year, but that's a little ways off. Uh, so for the millennials and young folks looking to buy their first home, uh, we're preaching patience. Save up as much as you can, make as big of a down payment as you can, and make sure that you find a home that really fits your needs.
What is within that outlook for 2025 that you were starting to go into for down payments? Do you anticipate that going to, or potentially continuing to keep grow?
Yeah, we do. Uh, right now we're seeing the the average down payment at about $30,000 on a home, uh, and we expect this to rise seasonally. Uh, these grow during the peak seasons of the home buying, uh, year in the spring and summer and to a lesser extent in the fall. So just some basic seasonality will lead to some higher down payments. Uh, but also if there's not relief from mortgage rates, we're going to continue to see the same trends that we've been seeing.
Joel, thanks so much. Joel Burner.
Thank you, Brad.
Certainly.
