Ready to Buy a House? Just Wait a Few Weeks

(Bloomberg Opinion) -- The housing market has turned in the past few weeks. We're probably looking at a cooling-off period rather than something nastier, but both possibilities lead to the same conclusion for would-be homebuyers: Be patient.

It makes more sense to wait to see how much the market will loosen rather than rushing in now at the first sign of improvement. Buying conditions are likely to be more favorable in a month or two than they are today.

It was mortgage rates that finally broke the fever. Their relentless rise got to a level that changed buyer behavior. Earlier this month 30-year mortgage rates rose to their highest level since 2009. Mortgage purchase applications have fallen to their lowest level since 2018. The inventory of unsold single family homes, while still far below pre-pandemic levels, is now rising on a year-over-year basis, according to Altos Research.

This still appears to be a manageable shift for homebuilders. Toll Brothers, a high-end homebuilding company, reported strong earnings last week. In their conference call they said the moderation in demand they've seen recently looks on par with the seasonal swings they experienced prior to the pandemic. Their customers put down non-refundable deposits of $75,000 when they place an order — a far cry from the low deposit days of the mid-2000's housing bubble — so their cancellation rate in May isn't meaningfully different from the 1% rate they had in the prior quarter.