The housing market has been showing signs of stabilization in recent weeks, thanks in part to lower mortgage rates. Purchase application data for the last week of November showed a 3% decline week-over-week, but the year-over-year decline of 40% is the smallest since October 19. This is significant because the market has hit an all-time low, but has now stopped stopped declining.
Inventories are also declining seasonally (it’s winter, after all), and there is no sign of a credit bust. This is in contrast to the 2006-2008 period, when a housing bubble burst and forced sellers flooded the market, causing inventory levels to skyrocket.
Mortgage rates have played a role in stabilizing the market. In recent history, rates have risen from 2.5% to 7.37%, causing demand to collapse. However, recent drops in mortgage rates, into the 6s and sometimes 5s, has caused homeownership demand to trend flat, rather than down.
It’s worth noting that anticipated Fed rate increases are broadly considered to be already fully priced into the current market movement. For now, the stabilization of the market is a positive sign.