The housing market is showing signs of entering a transitional phase, with summer sales being tepid but potential for increased activity by the end of the season. Mortgage rates are edging down, and resale inventory is increasing, giving buyers more options. The median price for new homes is declining, making them more affordable compared to resale homes. However, experts believe that the housing market will only see renewed momentum once mortgage rates drop further to ease affordability challenges and incentivize homeowners to move and increase inventory.
Looking ahead to 2024, U.S. home prices have shown a slowdown in annual gains, indicating that affordability remains a major constraint in the housing market. Zillow reports an increase in price cuts for listings, suggesting a shift towards a buyer’s market. Experts are hopeful that the Federal Reserve will cut the federal funds rate in September, which could further impact mortgage rates and affordability for buyers.
For a housing market recovery to occur, inventory of homes for sale needs to increase significantly to ease price pressures. Mortgage rates also need to cool off gradually to prevent a surge in demand that could lead to a rebound in home prices. The housing market is expected to return to more normal levels over time, but it may take a while for mortgage rates to reach pre-pandemic levels.
The National Association of Realtors (NAR) has agreed to pay a settlement to home sellers in a series of antitrust lawsuits, with new rules going into effect in August. These changes aim to make the real estate market more transparent and fair for buyers and sellers. Despite more resale homes entering the market, the inventory shortage remains severe, with many homeowners unwilling to sell due to low mortgage rates.
Builder sentiment has been declining, with high mortgage rates and inflation impacting new construction. New home sales have also been affected by high mortgage rates, leading to a slow pace of sales. Pending home sales, however, have shown an increase in June, indicating a potential uptick in activity towards the end of summer.
Affordability challenges continue to hinder the housing market, with home prices and mortgage rates remaining high. The NAR Housing Affordability Index shows that a median-priced home is unaffordable for many families. Experts caution against expecting a quick turnaround in affordability, as tight inventory and stretched affordability are likely to constrain home sales for the foreseeable future.
Pro tips for buyers and sellers include knowing your budget, being flexible about home size and location, and working with a local real estate agent. Sellers should research comparable home prices, ensure their home is in top-notch shape, and be prepared to make concessions in a competitive market.
While concerns about a housing market crash in 2024 exist, experts believe that the likelihood is low due to the high level of home equity among homeowners. Foreclosure activity remains low, with homeowners having substantial equity to avoid foreclosure. The best time to buy a home is when you find a home that meets your needs and is affordable, rather than trying to time the market.
In conclusion, the housing market is showing signs of a shift towards a buyer’s market, with affordability challenges still prevalent. While experts do not expect a housing market crash in 2024, concerns about affordability and inventory shortages remain. Buyers and sellers should be prepared for a competitive market and work with professionals to navigate the challenges in the real estate market.