Illustration by Lanette Behiry/Real Estate News
In the world of residential real estate, decisions are often driven by market data that can be conflicting and confusing. Housing Market Decoded, a publication authored by economists and market experts, aims to provide clarity and context to help individuals make sense of the numbers.
Over the past few years, potential homebuyers have faced significant challenges. Record-high prices, record-low inventory levels, and fast-paced pending sales, coupled with historically high mortgage rates, have left many buyers feeling discouraged. However, amidst these daunting headlines, three key trends are emerging this fall that could finally give buyers some leverage in the market.
As Regular as the Seasons
The housing market typically follows a predictable seasonal pattern each year, with variations at the local level but a clear rhythm nationally. This pattern includes a slowdown in midwinter, a surge in demand and supply in the spring, a dip in demand in midsummer, and a decrease in supply in the fall. As we approach Thanksgiving, the market tends to slow down once again.
Currently, in the late summer months, buyers find themselves in a favorable position where much of their competition has diminished, but inventory levels remain relatively high. With increased supply and moderate demand, buyers are less likely to face bidding wars and more likely to see sellers adjust their prices or accept offers below the listing price. Additionally, a larger selection of homes makes it easier for buyers to find a suitable match.
Making Progress on the Road Back to Normal
Following the onset of the pandemic in 2020, inventory levels in the real estate market plummeted by more than half from 2019 to 2021, leading many to question if this was the new normal. However, this year has seen a steady increase in inventory levels, surpassing seasonal trends and moving closer to pre-pandemic levels. Data from Realtor.com shows that buyers now have access to approximately 36% more active listings compared to the same time last year.
This surplus of supply is beginning to impact prices, which typically peak in early summer. Median list prices have started to dip slightly below year-ago levels, and homes are staying on the market for longer periods. This extended time on the market may prompt sellers to consider price reductions in the coming weeks.
Third Time’s the Charm: Are Mortgage Rates Finally Falling for Good?
In early August, significant economic news caused fluctuations in the stock and bond markets, subsequently affecting mortgage rates. The Federal Reserve’s decision to maintain rates but hint at potential rate cuts in September, combined with a concerning jobs report showing rising unemployment, led to a sharp decline in mortgage rates. Since then, rates have stabilized, offering homebuyers the opportunity to secure mortgages at substantially lower costs compared to earlier in the year.
Despite previous false starts, recent data suggests that mortgage rates are on a downward trajectory due to factors such as cooling inflation, a softening labor market, and signals from the Federal Reserve regarding rate cuts. This potential decline in rates could benefit buyers looking to enter the market or refinance their existing mortgages.
A Recipe to Act Now
With inventory levels and mortgage rates shifting in favor of buyers, some may wonder if it’s wise to wait for even more favorable conditions. However, the unpredictability of how quickly rates may fall or how the market will evolve underscores the importance of acting sooner rather than later. Seasonality will soon turn against buyers, with fewer new listings expected in the fourth quarter and a surge of springtime shoppers anticipated in early 2025.
In conclusion, the convergence of these three trends – the seasonal slowdown, improving inventory levels, and falling mortgage rates – presents a unique opportunity for buyers to navigate the real estate market with more leverage than in recent years. By staying informed and proactive, buyers can capitalize on the current market conditions and make informed decisions about their real estate transactions.
Jeff Tucker, the Principal Economist for Windermere Real Estate, provides valuable insights into economic data and its impact on housing markets. With a background in analyzing housing market trends, Jeff’s expertise sheds light on the evolving landscape of real estate. The views expressed in this article are solely those of the author, offering a perspective on the current state of the real estate market and the opportunities it presents for buyers.