US Homebuying Demand Surges as Mortgage Rates Decline

A home is listed 'For Sale' in New York City on March 31, 2021. Spencer Platt/Getty Images

Demand for purchasing homes has become stronger after the U.S. presidential election, with a dip in mortgage rates enticing buyers into the market, according to real estate brokerage Redfin.

Redfin’s Homebuyer Demand Index—a measure of home tours and other property purchase services from the company’s agents—was up by 8 percent yearly for the week ending Dec. 8, to nearly its highest level since April, said a Dec. 12 statement from the company. In addition, mortgage applications to buy a property were up by almost 20 percent from a month back while pending home sales jumped 4.1 percent year over year. Prevailing data points to strong buyer demand for houses, which Redfin attributed to cooling mortgage rates.

“The average weekly rate is 6.69 percent, down from a four-month high of 6.84 percent two weeks earlier. That has pushed the typical U.S. homebuyer’s monthly housing payment down to $2,527, its lowest level in more than two months,” it said.

Sam Khater, Freddie Mac’s chief economist, pointed out in a Dec. 12 statement that the average rate on a 30-year fixed-rate mortgage has fallen for the third straight week.

Combined with “firm consumer income growth and a bullish stock market,” demand from potential homebuyers has risen over the past weeks.

Although Khater said the housing market outlook was improving, he noted that the “improvement is limited given that homebuyers continue to face stiff affordability headwinds.”

In addition to lower rates, financial uncertainty surrounding the U.S. presidential race has settled. Many buyers have come to terms with the possibility that mortgage rates will likely be at the six percent level for some time.

On the supply side, new listings of properties for sale are up by 7.9 percent from a year back, adding more inventory into the market.

Chen Zhao, economic research lead at the company, said: “The recent decline in mortgage rates isn’t pushing demand to new heights.

“Rather, demand is settling into its new, post-election normal. In the months leading up to the election, house hunters were hibernating; demand was slower than we would have expected, even with high mortgage rates. Now, early-stage demand has jumped up to where we’d expect it to be.”

Cheaper Renting

While mortgage rates have lowered and triggered homebuying demand, renting a home has also become cheaper.

In November, the median U.S. asking rent dropped by 0.7 percent from a year back to $1,595, the lowest level since March 2022, according to Redfin, which attributed the decline to a “record number of new apartments that have been completed this year.”

An individual with a $2,000 budget is now able to rent an apartment with 70 square feet more space than in mid-2022, the brokerage noted.

“Renters are getting more for their money than they were during the pandemic because asking rents have since stabilized below their record high, and incomes have continued to climb,” said Redfin Senior Economist Sheharyar Bokhari.

“Rental affordability has improved thanks to the recent apartment construction boom, especially in Sun Belt states. That trend is likely to continue into 2025, as there are a lot of still-to-be-finished apartment buildings due to come online.”

Real estate marketplace Zillow said that rent growth has mostly remained subdued this year, citing a boom in construction activity. The company expects this trend to continue into the first half of 2025.

Despite declining, the $1,595 median rent is still nearly 20 percent higher than in October 2019, before the pandemic, when the median asking rent was $1,337.

Lawmakers have taken measures to control rent inflation. In June, a group of representatives introduced the “Preventing Algorithmic Facilitation of Rental Housing Cartels Act,” which seeks to ban “digital price fixing” practices used by landlords, according to a June 6 statement from Rep. Becca Balint (D-Vt.).

The lawmaker said companies selling property management software are aiding landlords to raise rents by 5–12 percent by enabling them to coordinate prices. Such practices lead to lower competition in the market while citizens end up paying more for renting properties, the statement said.

“Corporate greed continues to exacerbate the housing affordability crisis in this country. We cannot allow corporations to continue to drive up their profits by illegally hiking already high rent,” Balint said.