Existing home sales slightly ticked up in January, aided by lower mortgage rates from the end of 2023. But now it seems rates are picking back up, climbing up for the third week in a row. What would it take for things to finally turn around?
Zillow Senior Economist Orphe Divounguy joins Yahoo Finance to discuss the state of the housing market and what could finally turn it around.
Divounguy gives insights into trends in the housing market at the moment and what buyers need to keep in mind:
"We have a lot of cash buyers. Cash buyers have taken over. If you look at what we're seeing in the market in January, what we're seeing is sellers in an environment where there weren't a lot of sales in December, sellers coming back are not sure how to price their homes. You're seeing one in five active listings with price cuts. It means that if you're a buyer right now, if you're a buyer coming in early, you may be able to take advantage of the fact that sellers are not quite sure how to price their homes to get yourself a great discount."
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
JULIE HYMAN: Existing home sales ticked up in January, boosted by lower rates in November and December. But mortgage rates have since reversed course, climbing up for a third straight week. Those elevated rates and low supply could mean a drought for the spring home-buying season.
With more of the impact, we're joined by Orphe Divounguy, Zillow Senior Economist. Orphe, thank you so much for being here. What is going to give in this housing market? This is the question we keep asking. And it seems like we remain sort of at a stalemate.
ORPHE DIVOUNGUY: Thanks for having me. Look, existing home sales increased 3.1% in January. And so-- and sales, well, sales is still down relative to last year. You know, this is kind of because the homes that sold in January reflected homes that went pending a month or two ago. But when you look at Zillow data, what you see is it's the dawn of the home shopping season. Sellers are slowly but surely returning to the housing market.
Remember, fewer existing homes coming on the market in 2023 meant the housing market was supply-constrained. But despite higher mortgage rates, we're starting to see some improvements on that front. New listings are up 6% when compared to last year. And inventory is also up 3% when compared to last January. So we're starting to see sellers return.
JOSH LIPTON: Is that-- is that more pronounced, Orphe, in some regions than others?
ORPHE DIVOUNGUY: Absolutely. We're seeing the biggest uptick in some of these expensive metros, like San Diego, Miami, Riverside, right. Listings are up 27% in San Diego, 22% in Miami. So you're starting to see that activity. In fact, when you look at price tiers, new listings for mid to high price tier homes have made the biggest rebound in January.
So we're seeing that there's a ton of demand out there. There's still a lot of buyers out there. We got some great news in terms of population growth. We got great news in terms of productivity growth in 2023. And so you take that and you add the fact that the rest of the world is slowing down a little bit faster and the US looks relatively more attractive, a relatively more attractive place to invest, so we're going to have buyers despite higher rates. And we expect a more competitive home shopping season when compared to last year.
JOSH LIPTON: And, Orphe, when you talk about these buyers, do we have any kind of line of sight into who these buyers are? What's the demo? You know, I'm just interested given where the 30-year fixed is at.
ORPHE DIVOUNGUY: Yeah. Well, look, we have a lot of cash buyers, right. Cash buyers have kind of taken over. But we also have-- you know, if you look at what we're seeing in the market in January, what we're seeing is sellers, in an environment where there weren't a lot of sales in December, sellers coming back are not quite sure how to price their homes. And so you're seeing one in five active listings with price cuts.
And so it means that if you're a buyer right now, if you're a buyer coming in early, you may be able to take advantage of the fact that Sellers are not quite sure how to price their homes to get yourself a great discount.
JULIE HYMAN: Orphe, we recently spoke to Meredith Whitney, who was known during the financial crisis for being one of the folks who spotted the subprime crisis sort of coming. Now she says we are over the next couple of years really going to see housing prices come down. She says, it's because older Americans, boomers, are really-- those on fixed incomes perhaps, are really feeling the pain of inflation, consumer goods, groceries, et cetera. And they're going to be forced to sell at a higher rate perhaps than people are expecting. Are you factoring that into your models? Is that something you think is indeed going to happen?
ORPHE DIVOUNGUY: Look, we've been waiting for that silver tsunami for quite some time, and it just hasn't materialized. Older Americans are less likely to move than younger Americans. The bulk of the wealth in this country sits with boomers, right? And so I'm not sure that that's actually a story that I see in the data right now or that I think is likely to materialize anytime soon. I think we're probably going to see a huge transfer of wealth from boomers to their children in the coming years.
