As the spring home-buying season approaches, there are signs that buying and selling activity in the estate marketplace may not fully bloom. A combination of still-high mortgage rates and home prices amid historically low housing stock continues to put homeownership out of reach for many—most notably first-time buyers. Many may have to surrender to the reality of elevated home prices and mortgage rates if they want to buy a home in the foreseeable future.
Essentially, all of the 2023 headwinds remain. Elevated mortgage rates, out-of-reach home prices, and record-low housing stock continue to make for a perfect unaffordability recipe.
“The recent boomerang in rates has dampened already tentative home-buyer momentum as we approach the spring, a historically busy season for home buying,” said Sam Khater, chief economist at Freddie Mac.
While U.S. home prices declined in December for the second consecutive month, according to the latest S&P CoreLogic Case-Shiller Home Price Index, home prices year-over-year jumped 5%. Experts anticipate a slower rise in 2024 home prices compared to recent years. Moreover, the fluctuation will vary regionally and depend strongly on local market supply.
“For the best possible outcome, we’d first need to see inventories of homes for sale turn considerably higher,” says Keith Gumbinger, vice president at online mortgage company HSH.com.
Kuba Jewgieniew, CEO of Realty ONE Group, is optimistic about a recovery this year. “We're definitely looking forward to a better housing market in 2024 as interest rates start to settle around 6% or even lower,” says Jewgieniew.
With many homeowners “locked in” at low interest rates or unwilling to sell due to high home prices, demand continues to outpace housing supply—and likely will for a while.
Existing-home sales showed tentative signs of a pre-spring thaw in January, climbing 3.1% from the month before. Sales dipped 1.7% from a year ago. Meanwhile, home prices continue to grow to unprecedented heights, reaching $379,100, which marks the seventh consecutive month of yearly price increases.
New homes continued to lure buyers frustrated with the lack of resale inventory. Sales of newly constructed single-family houses were up 1.5% in January from the month before and 1.8% annually.
If the latest pending home sales data is a harbinger of the estate marketplace activity then we’re in for a paltry season. NAR’s Pending Homes Sales Index sank 4.9% in January compared to the month before and was down 8.8% year-over-year.
Despite a slight decrease in mortgage rates, affordability concerns persist, with monthly payments on the rise. Experts project stabilized rates but anticipate the impact to favor homeowners over buyers, exacerbating affordability woes.
While foreclosure activity sees a slight uptick, experts remain optimistic about the market's resilience, citing economic strength and robust loan quality as key mitigating factors.
Navigating the housing market's unpredictability, experts stress the importance of personal financial readiness over timing considerations, underscoring the long-term benefits of homeownership as a wealth-building strategy.
In conclusion, while the housing market shows signs of recovery, challenges persist, necessitating informed decision-making for buyers and sellers alike.