Real Estate Rundown October 2024
October 01, 2024
Photo courtesy of Ahmet Kurt via Unsplash
Home Prices Remain Stagnant?
The U.S. housing market has remained unexpectedly resilient despite higher mortgage rates and declining sales. Although demand and transaction volumes have decreased significantly over the past two years, home prices have not fallen substantially. Inventory has been building, but price cuts have remained steady, indicating "downside stickiness" as sellers are reluctant to lower prices. The median price of homes entering contracts has even risen recently, suggesting some stability. Although there are more homes on the market compared to a year ago, the expected decline in prices has yet to materialize, possibly due to lower mortgage rates creating a price floor. The article highlights that the housing market has lost much of its traditional seasonality, and the potential for a significant price drop may depend on whether investor activity increases or more sellers enter the market.
Mortgage Demand Is On The Rise
The recent interest rate cut by the Federal Reserve has sparked a surge in homebuyer activity, with mortgage-rate locks increasing by nearly 70% and mortgage-purchase applications up over 10% month-over-month. While some of the increased activity may be from buyers waiting for the rate cut, other indicators, such as Redfin’s Homebuyer Demand Index, also show improving demand. The cut has brought many prospective buyers off the sidelines, and affordability is improving, with the median monthly housing payment down 4.4% year-over-year. Declining mortgage rates have also encouraged more sellers to list their homes, leading to a 7.6% annual increase in new listings—the highest since June.
Home Sales Still Fall, But Remain Higher Than Expected
New single-family home sales in August fell 4.7% from July but remained 9.8% higher than the same period last year, according to the U.S. Census Bureau. The median price of new homes dropped 4.6% year-over-year to $420,600, and the supply of new homes increased slightly to 7.8 months. Despite mortgage rates easing since May, both new and existing home sales declined in August. However, builder confidence has risen, and fewer builders are offering price cuts or incentives, suggesting the sales dip could be temporary. Improving affordability and increased inventory provide a favorable entry point for first-time homebuyers, though renting remains expensive, with rents up 4.5% over the past year.