The REALTORS® Buyer Traffic Index increased to 63 in March 2019 (55 in February 2019), the fourth month of sustained recovery after it dipped to a low of 44 in November 2018 when mortgage rates hit almost five percent. But buyers started house-hunting again as mortgage rates started falling in December 2018 when the Federal Reserve put a hold on interest rate hikes for the year and adopted a patient policy stance. As of the week of May 9, the 30-year fixed rate has climbed down to near four percent, to 4.11 percent.[2] The REALTORS® Buyer Traffic Index leads existing and pending home sales by one to two months so the uptick in the March index indicates a stronger market in May, along with the seasonal uptick in homebuying activity.
Buyer traffic conditions were stable or stronger during the 3-month period of January—March 2019 compared to the same period one year ago in 47 states and in the District of Columbia. However, REALTORS® reported weaker buyer traffic in California, Connecticut, and West Virginia. Respondents from California have reported the lingering negative impact of the California wildfires on the supply of and demand for homes in affected areas. However, the lower mortgage rates and decline in prices in CA metros such as San Francisco should make homes more affordable and cause a pickup in homebuying activity in the coming months. Respondents from California and Connecticut also reported that high property taxes and the $10,000 limit on the combined itemized deduction for property taxes, state and local income tax (SALT)— are negatively affecting homebuying.
With mortgage rates falling, the mortgage payment arising on a
median-priced home at 10 percent down payment has fallen from $1,259 in
June 2018 to $1,151 as of March 2019, a savings of $108 per month, which
amounts to $38,991 over a 30-year period.
The decline in mortgage rates is not the only positive factor
underpinning the pickup in homebuying. Perhaps more important is the
strong job and wage growth. The unemployment rate fell to a low of 3.6
percent in April 2019, the lowest since 1953; 2.6 million net new jobs
were created as of April 2019 from one year ago; and the number of
unemployed fell to 5.8 million from 6.3 million one year ago. Wages
continue to increase at a faster pace than inflation, with average
weekly wages rising at nearly three percent in April 2019 from one year
ago, ahead of inflation of two percent. Economic conditions are pointing
to an increase in homebuying activity, which REALTORS® are seeing on
the ground!