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The housing market is picking up in some of the most expensive regions of the US
The housing market is showing signs of life.
Listing activity and homes going under contract ticked up last month nationwide, the latest sign that some of the paralysis brought on by the rapid jump in mortgage rates in recent years is easing.
But there’s a limit to how far the housing market can rebound as homeowners with ultra-low mortgage rates stay put instead of listing their homes and accepting today’s rates of 6% or more, a phenomenon known as the rate lock-in effect.
“Generally, new listings and sales moved closer to pre-pandemic norms in September,” said Kara Ng, a housing economist at Zillow. “That’s still a long way to go in terms of normalizing supply.”
In September, the biggest gains came in pricy locales like Seattle, Los Angeles, and San Jose, Calif.
Those regions have higher proportions of buyers who finance their purchases and jumbo mortgages that hand homebuyers bigger monthly cost savings when mortgage rates fall. In some markets, listing prices have even dropped slightly.
About 950,000 homes were on the market nationwide in September. That number has been steadily rising this year, though it’s still about 22% below 2019 levels.
New listings rose by 25% or more last month compared to a year earlier in the Seattle, Silicon Valley, Denver, and Washington, D.C., areas, according to Realtor.com. Median listing prices in all of those markets top $599,000.
In expensive parts of the country, any mortgage rate savings can help spark buyer interest, said Tim Nguyen, a real estate agent in Santa Clara, Calif., where the median home lists for more than $1.4 million. Average interest rates this year dropped more than a percentage point from as high as 7.22% in May to closer to 6% last month.
“That always drives the market,” Nguyen said. “If you look at a $1 million home, for every percentage point drop it’s a little over $500 of savings every month. That’s significant when you need money to buy groceries.”
Read more: Is this a good time to buy a house?
Pending sales, a measure of homes under contract, were up by double digits in Portland, Ore., Seattle, and several California cities in recent weeks, according to Redfin. But the signs of improvement come off of a very low base — a year ago, homebuying was muted because mortgage rates were close to 8% and measures of homes under contract have remained near record-low levels for years.
Nationwide, Redfin calculated that pending sales rose 3.2% year over year for the four weeks through Oct. 13. It was the biggest jump in more than three years.
Troy Khuu, a San Jose-based agent, said the most desirable homes in his market — ones that are updated, located in strong school districts, and close to tech companies — are still selling above their asking price, sometimes in a matter of days. But buyers aren’t rushing to buy homes that don’t meet all of their specifications, he said.
“It’s no longer the buying frenzy we saw a few years ago,” Khuu said. “It depends on the listing. It depends on the price.”
Homebuying is a heavily seasonal activity. Zillow deemed September as something of a “last call” for the market before sales slow down for the winter. And in recent weeks, mortgage rates have started rising again, and mortgage applications for home purchases have slowed.
“We’re making strides in the right direction, but they’re pretty small steps,” said Danielle Hale, chief economist at Realtor.com. “I think it’s still going to be a while before we stop talking about the mortgage rate lock-in effect.”
Read more: Should you lock in a mortgage rate — and if so, when?
Claire Boston is a senior reporter for Yahoo Finance covering housing, mortgages, and home insurance.
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Sales of existing homes fell in September as house hunters remained on the fence about buying a home despite mortgage rates easing during the month.
Existing home sales slipped 1.0% from August’s tally to a seasonally adjusted annual rate of 3.84 million, the National Association of Realtors said Wednesday. That marked the lowest rate since October 2010. Economists polled by Bloomberg expected a pace of 3.88 million in September.
On a yearly basis, sales of previously owned homes were 3.5% lower in September. The median home price rose 3.0% from last September to $404,500, marking the 15th consecutive month of annual price increases.
“Home sales have been essentially stuck at around a 4 million-unit pace for the past 12 months,” NAR chief economist Lawrence Yun said in a press release.
There have been significant challenges that have weighed on sales activity, including a lack of inventory, escalating prices, and elevated mortgage rates. Last month, however, those factors turned around.
The Federal Reserve cut its benchmark rate by half a percentage point in September. While the central bank doesn’t set mortgage rates, its actions influence their direction of movement.
Mortgage rates hit the lowest level since February 2023 ahead of the Fed decision to ease, while listing inventory picked up.
But overall, that hasn’t been enough to entice buyers.
“Some consumers are hesitating about moving forward with a major expenditure like purchasing a home before the upcoming election,” Yun said.
Tesla (TSLA) reported mixed third quarter results after the bell on Wednesday, but the stock jumped in after-hours trading as investors cheered the earnings beat, higher gross margins, and news that Tesla’s cheaper EV is on track for production next year.
For the quarter, Tesla reported revenue of $25.18 billion vs. $25.4 billion per Bloomberg consensus, higher than the $25.05 billion it reported in Q2 and also topping the $23.40 billion Tesla reported a year ago. Tesla posted adjusted EPS of $0.72 vs $0.60 expected, on adjusted net income of $2.5 billion and free cash flow of $2.9 billion.
The closely watched gross margin figure came in at 19.8%, much higher than the 16.8% expected.
Tesla shares were up nearly 8% in after hours trade.
“We delivered strong results in Q3 with growth in vehicle deliveries both sequentially and year-on-year, resulting in record third-quarter volumes,” the company said in its earnings deck. “Preparations remain underway for our offering of new vehicles — including more affordable models — which we will begin launching in the first half of 2025.”
Earlier this month, Tesla (TSLA) announced third quarter deliveries that slightly missed expectations, sending the stock lower.
Tesla said it delivered 462,890 vehicles in Q3, up 6.4% quarter over quarter, to mark the first quarter of delivery growth this year. The numbers also came in ahead of the 435,059 EVs the company delivered in the year-ago period. But Wall Street had expected Tesla to deliver closer to 463,897, according to Bloomberg.
“Refreshed Model 3 ramp continued successfully in Q3 with higher total production and lower cost of goods sold quarter-over-quarter. Cybertruck production increased sequentially and achieved a positive gross margin for the first time,” Tesla said in its report.
Tesla said it expects vehicle deliveries to achieve “slight growth” in 2024.
Ahead of Tesla’s Q3 disclosure, shares were down approximately 11% since Tesla revealed its robotaxi, dubbed the Cybercab, at its showy “We, Robot” event from the Warner Bros. studio lot in Burbank, Calif., on Oct. 10.
The debut and release of a cheaper EV is what many analysts and industry watchers believe will spur the next leg higher of EV sales, as even CEO Elon Musk has said before. During its Q2 report, Tesla and Musk said the company remains on track for the production of new vehicles, likely including a cheaper EV, in the first half of next year.
Investors and analysts were left wanting more details from Tesla’s “We, Robot” event on the Cybercab itself and detailed testing plans, along with questions about the development of Tesla’s sub-$30,000 EV, dubbed the Model 2.
Transak disclosed a data breach affecting over 92,000 users after a phishing attack compromised an employee’s laptop.
CryptoCurrency
The Dow plummets more than 600 points and is on track for its worst day in more than a month
The Dow Jones Industrial Average and other major indexes suffered a steep decline Wednesday afternoon as the yield on the benchmark 10-year U.S. Treasury note continued its upward climb, reaching 4.23%—a level not seen since July.
In the afternoon, the Dow dropped 631 points, or 1.4%, heading for its worst day in over a month. Meanwhile, the tech-heavy Nasdaq and the S&P 500 declined by 2.2% and 1.4%, respectively. However, there was some relief for investors as oil prices eased, with West Texas Intermediate (WTI) futures trading around $70.65 per barrel.
The Federal Reserve’s Beige Book, released in the afternoon, reported that economic activity remained largely unchanged across the 12 Federal Reserve Districts, with the Southeast significantly impacted by a harsh storm season.
On Wednesday, all eyes are on Tesla (TSLA) as the company prepares to release its latest earnings report. Analysts expect earnings per share to be 60 cents, down from 66 cents a year ago but an improvement from 52 cents in the previous quarter, according to FactSet estimates. Revenue is projected to hit $25.4 billion, compared to $23.3 billion in the third quarter of 2023 and $25.5 billion in the preceding quarter.
Apart from Tesla, investors are closely monitoring earnings reports from other major corporations, including AT&T (T), Boeing (BA), and Coca-Cola (KO).
McDonald’s stock plunges over 5%
McDonald’s (MCD) shares took a sharp hit, falling over 5% after the Centers for Disease Control and Prevention (CDC) linked the chain’s Quarter Pounder burgers to an E. coli outbreak. The outbreak has led to 10 hospitalizations and one death, driving a significant decline in McDonald’s stock during the afternoon trading session.
As of now, 49 cases have been reported across 10 states between Sept. 27 and Oct. 11, with a majority of illnesses occurring in Colorado, Nebraska, Utah, and Wyoming. The CDC noted that most of those affected had eaten a Quarter Pounder. Investigators are working swiftly to identify the contaminated ingredient.
Spirit Airlines stock soars 30%
After a failed attempt at merging with JetBlue (JBLU-0.80%), ultra-low-cost carrier Spirit Airlines (SAVE+28.01%) is reportedly turning back to a familiar partner. The Wall Street Journal (NWSA-0.34%), citing people familiar with the matter, reports that Spirit and Frontier Airlines (ULCC+3.05%) are in early talks over a potential merger. The news sent Spirit’s stock soaring nearly 30% on Wednesday.
–Francisco Velasquez and Rocio Fabbro contributed to the article
The semi-autonomous region of Tanzania is taking advantage of a sandbox regulatory framework adopted in July.
Bitcoin’s correction ignited selling in altcoins, which are slipping below critical support levels.
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