Market Update: Housing demand resilient even with higher mortgage rates

Despite higher mortgage rates, the U.S. housing market is exhibiting notable resilience, with several key indicators highlighting sustained demand.

Pending Home Sales

In October, the U.S. experienced an unexpected rise in contracts for previously owned homes for the third consecutive month. The Pending Home Sales Index increased by 2.0% to 77.4, marking its highest level since March. This uptick occurred despite elevated mortgage rates and an increasing inventory of homes for sale, supported by a robust job market strengthening buyers' finances.

Mortgage Rates and Buyer Activity

The average rate on a 30-year mortgage has decreased for the third straight week, dropping to 6.6% from 6.69% the previous week. This decline has provided some relief for prospective homebuyers, especially during the typically less competitive winter period. Despite this, high mortgage rates and rising home prices have continued to limit homeownership opportunities, with U.S. home sales on track for their worst year since 1995.

Regional Market Variations

Certain metropolitan areas are poised for significant growth in 2025. Cities such as Colorado Springs, Miami, and Virginia Beach are expected to see home sales increases ranging from 13.5% to 27.1%, contrasting sharply with the national outlook of a mere 1.5% increase. These markets benefit from factors like strong recent sales, abundant inventory due to new construction, younger populations, and relatively lower costs bolstered by flexible work arrangements.

Conclusion

While higher mortgage rates present challenges, the housing market continues to demonstrate resilience, with regional variations offering opportunities for growth. Prospective buyers and sellers should closely monitor both national trends and local market conditions to make informed decisions in this evolving landscape.

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