The Buyer Surge Wall Street Missed

Min 1

HousingWire's Housing Market Tracker revealed something significant in data released last week:

Pending home sales for the week ending January 23 reached their highest weekly total in roughly three years—nearly double what they were at the start of January.

The progression tells the story. Early January showed pending sales barely limping along. Three weeks later? They'd nearly doubled. That's a demand shift triggered by mortgage rates approaching the psychological 6% threshold.

Freddie Mac confirmed rates averaged around 6% for late January, down from 7% through most of last year. The difference between a 7% mortgage and 6% on a typical home saves buyers roughly $240 per month or nearly $3,000 annually.

If you're an investor watching market trends, this signals the frozen housing market is thawing faster than most economists predicted.

Buyers who sat out the past two years are flooding back in, and spring selling season hasn't even started yet.

Min 2

Purchase mortgage applications jumped alongside pending sales, posting strong year-over-year gains through late January. Refinance activity surged as homeowners rushed to lock in lower rates.

Monthly housing payments dropped to their lowest level in two years—down about 5% from a year ago. The combination of slightly lower prices and meaningfully lower rates created genuine payment relief for buyers.

Here's the investor payoff: when pending sales surge this dramatically heading into spring, closed sales follow within weeks. February and March reports will likely show significant gains.

The National Association of Realtors already forecasts home sales jumping about 14% this year. If January's pace continues, that forecast might prove conservative.

Min 3

Markets with tight inventory and surging pending sales see prices stabilize or accelerate. A market that posted flat prices late last year could easily show modest appreciation by mid-year as buyers compete for limited inventory.

Consider a rental property purchased for around $350,000 in a market experiencing this surge.

Even modest appreciation over six months plus mortgage paydown from rental income means you're building over $10,000 in equity quickly.

Most investors are still positioned for a weak housing market—holding cash, waiting for the "crash" that keeps not happening, or buying treasuries.

Meanwhile, properties in markets experiencing this pending sales surge are generating strong total returns combining appreciation, mortgage paydown, and rental income.

Min 4

Individual investors are responding while institutions remain cautious. Local investor groups tracked pending sales data and started making offers in late January.

They're locking in purchases before spring competition drives prices higher.

Large funds are still analyzing whether this surge is sustainable, running models and waiting for more data. Their committees need months of confirming evidence.

By then, the opportunity will be priced in.

Here's your edge: history shows housing demand strengthens materially when mortgage rates approach 6%. That pattern held for decades and appears to be reasserting itself now.

Focus on metros with inventory still well below normal levels but showing this pending sales acceleration. Hartford, Northeast markets, and select Midwest cities fit this profile. These are markets where tight supply meets surging demand.

The risk? If rates reverse toward 7%, this demand surge could evaporate. Monitor rates weekly. If they climb back above mid-6% range and stay there, pending sales will likely decline again.

Min 5

Properties that sat on the market for months late last year are now receiving multiple offers within weeks as pending sales accelerate. That confirms values are stabilizing or rising.

A property purchased in February before pending sales translate to closed sales will outperform the same property purchased in June after appreciation has occurred.

You're capturing the front end of the demand wave.

The data reveals buyers have adjusted to the rate environment. They're no longer waiting for 4% mortgages that may never return. At 6%, enough buyers find payments manageable that market velocity returns to functional levels.

Takeaway

Pending sales nearly doubling in January represents pent-up demand releasing as affordability improves marginally.

Translation: prioritize markets showing this pending sales acceleration before closed sales data makes the trend obvious. Look for metros where inventory remains well below normal but pending sales are surging.

The buying window extends through early spring. Once February and March closed sales confirm the surge, competition intensifies. Properties that sell in a month now might sell in days by April.

Monitor mortgage rates as your primary indicator. If rates stay near 6%, this surge likely continues. If rates climb back toward 7%, expect pending sales to decelerate. Position accordingly and move before the crowd realizes the housing market just turned.