Many anticipated a strong spring home-buying season, but the reality has proven challenging for hopeful buyers. Home sales stagnated last month as mortgage rates and home prices continued to rise. However, an increase in resale inventory may help moderate home price growth somewhat.
Experts believe the market will regain momentum only when mortgage rates drop sufficiently to make homes more affordable. Unfortunately, this improvement is delayed due to persistent inflation, which is slowing the Federal Reserve’s ability to cut the federal funds rate. Mortgage rates, which indirectly follow this benchmark rate, have felt the impact of the Fed’s highest rate in over two decades.
A single rate cut could ease mortgage rates and improve market conditions. For instance, a reduction from 6.8% to 6% could significantly enhance buyer purchasing power. However, experts, including Jiayi Xu from Realtor.com, do not foresee such a drop soon, with mortgage rates hovering around 7%.
U.S. home prices have remained high despite these rates, with a 6.5% annual gain in March, according to the S&P CoreLogic Case-Shiller Home Price Index. This marks the ninth consecutive month of year-over-year increases and a new March high.
Conditions for Housing Market Recovery
For a recovery, several conditions must occur. Keith Gumbinger from HSH.com emphasizes the need for significantly higher inventories of homes for sale, which would ease price pressures. Additionally, mortgage rates need to decrease, but a gradual decline is preferable to avoid a sudden demand surge that could deplete inventory gains.
2024 Housing Inventory Outlook
Despite an increase in resale homes, the inventory shortage remains severe. Many homeowners with low mortgage rates are unwilling to sell, maintaining high demand relative to supply. Rick Sharga from CJ Patrick Company does not expect a meaningful increase in supply until mortgage rates drop to the low 5% range, likely not until after 2024.
Real Estate Market Statistics
High mortgage rates dampened housing market activity in April. Existing-home sales dropped 1.9% from March, with a median price rise to $407,600. New home sales also fell due to high rates and increased existing home inventory.
Foreclosures and Home Equity
Foreclosure starts and filings are lower than pre-pandemic levels, with completed foreclosures rising slightly. Homeowners possess substantial home equity, helping avoid foreclosure sales by paying off mortgage debts or selling properties to protect equity.
Best Time to Buy a Home in 2024
Buying a home is a personal decision based on individual financial readiness rather than market timing. Experts advise that purchasing a home is worthwhile for building equity and net worth, regardless of market conditions.
Thanks for reading,
Chris
