June 19, 2024 - KreditSanta News: Home prices are seeing their slowest growth in more than a year, and with mortgage rates potentially set to decline, a dynamic shift could be on the horizon for buyers and sellers. Recent data from Redfin shows that home prices increased by just 0.3% in May, the smallest rise since January of last year. Year-over-year, prices rose by 7.2%, but signs indicate that this growth is fluctuating.
As many await lower mortgage rates, the pace of price increases could slow further. However, if buyers or sellers enter the market en masse, it could significantly influence price trends. "New listings have been inching upward, which has taken a little pressure off of sale prices because buyers have more options to choose from," according to Redfin's analysis.
Listings increased by 0.3% in May from the previous month and by 8.8% from a year earlier, although they remain about 20% below pre-pandemic levels.
The 'lock-in effect,' where homeowners hesitate to sell due to their low mortgage rates, is beginning to ease. Redfin notes, “Eventually, the people who don’t want to move because they have an ultralow mortgage rate have to move.” Glenn Kelman, Redfin’s CEO, humorously remarked that some people are more motivated to sell this year “just because they’re going crazy living with their ex-wife, or they have a third baby and there’s no space in the house.”
According to Realtor.com’s analysis of Federal Housing Finance Agency data, as of the fourth quarter of last year, more than half of outstanding mortgages have a rate of 4% or lower, and over three-quarters have a rate of 5% or lower. Despite recent decreases, mortgage rates are still high compared to historical lows seen during the pandemic.
Last October, daily mortgage rates exceeded 8%, a two-decade high, but the average 30-year fixed mortgage rate now stands at 7.02%.
Redfin's economics research lead, Chen Zhao, mentioned, “We learned last week that inflation continued to cool in May, which means mortgage rates could decline in late summer or early fall.” This potential drop could bring both buyers and sellers back to the market, affecting price trends based on who returns in greater numbers. Zhao added, “If sellers come back faster, prices would likely cool, but if buyers come back faster, prices would likely ramp up.”
Last year, a rise in listings led to a dip in home prices, reflecting mixed motivations among sellers and buyers.
The existing home supply plummeted to its lowest in almost three decades, driven by both high mortgage rates and affordability challenges for buyers. The upcoming release of May’s existing home sales data on Friday may provide more insight into current market trends.
Stay tuned for further updates on the real estate market as we monitor these developments closely.