The housing market continues to shift in 2024, with rising mortgage rates impacting key metrics. This week’s national data reveals several trends:
Inventory on the Rise:
- Unsold single-family homes increased for the first time this year, reaching 498,000 nationally. This represents a 16% jump compared to last year and is expected to continue growing throughout the season.
- Compared to two years ago, inventory is significantly higher (53%) as mortgage rates remain well above pre-pandemic levels. Forecasters are still predicting a rate reversal, but until that occurs, higher rates will continue to drive up inventory.
Sales Pace Slows Down:
- The number of new contracts signed (pending sales) dipped by 2% this week compared to last. While still slightly above 2023 levels, this marks a potential turning point as affordability concerns continue to plague buyers.
Price Adjustments Emerge:
- For the first time since November, the percentage of homes with price reductions ticked upwards. Currently, 30.4% (up from 30% last week) of listings have seen price cuts, indicating a potential softening in seller momentum.
Prices Remain Elevated:
- Despite the uptick in price reductions, the median price of existing single-family homes sits at $429,000, up almost 1% from last week and slightly higher than 2023 during the same time period. Similarly, the median price of new listings reached $410,000 this week, reflecting continued year-over-year growth.
Key Takeaways:
- Rising mortgage rates are impacting affordability and buyer demand, leading to a gradual increase in inventory and a slowdown in the sales pace.
- While price reductions are emerging, they don’t signal a decline in home prices. Instead, they point towards a shift in market dynamics with slower price growth compared to the rapid increases witnessed earlier.
- It’s important to remember that the market is still adjusting to the new interest rate environment. While significant price drops are not expected, the overall pace of appreciation is likely to moderate.
Looking Forward:
- Whether the current trends persist will depend heavily on mortgage rate movements. If rates stay elevated or continue to climb, we may see further increases in inventory and potentially more pronounced adjustments in pricing strategies.
- It’s crucial for both buyers and sellers to stay informed and adapt their strategies based on the evolving market conditions. Buyers should be realistic about affordability and prepared for potential competition, while sellers need to adjust their pricing expectations and marketing strategies to attract buyers in this changing landscape.
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