3 MIN READ
Published July 16, 2024
As we move deeper into 2024, the U.S. housing market is showing signs of possible change, especially with recent shifts in mortgage rates. Here's a detailed look at the latest data and what it might mean for buyers, sellers, and the overall market.
Current Market Conditions
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Mortgage Rates Drop Below 7%
Recent weeks have seen mortgage rates dip below the 7% mark for the first time in months, driven by encouraging inflation data and a bond market rally. This could be a turning point for the housing market. Lower mortgage rates often lead to increased buyer interest, which might reduce the number of price cuts needed to sell homes.
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Inventory Levels
The current inventory of unsold single-family homes in the U.S. is 651,000. This is just a slight decrease from the previous week, but it represents a 38.5% increase compared to last year. However, it’s still 32% lower than the levels seen in 2019. Inventory has grown in every state, although most areas still have fewer homes for sale than before the pandemic. Notably, states like Florida, Texas, Oklahoma, Arkansas, and Idaho have more homes on the market now than they did in 2019.
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Impact of July 4th Holiday
The July 4th holiday week saw a typical slowdown in new listings and home sales. Only 57,000 new single-family homes were listed, with 11,000 of these going into immediate contract. This immediate sales figure, which indicates strong demand, is currently low at 16%. This percentage has been declining since May.
Sales and Pricing Trends
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Pending Sales
During the holiday week, there were 58,000 new home contracts, a number consistent with the past two years. Currently, 382,000 single-family homes are under contract, a slight 1% increase from last year. If mortgage rates continue to fall, we could see an increase in weekly pending sales, potentially reaching around 70,000, indicating an 8% rise.
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Home Prices
The median listing price for homes is now $450,000, down 1% from last week and unchanged from a year ago. The median price of new listings dropped to $404,900, a significant weekly decline and 1% lower than the same period last year. This is the first time in over a year that new listing prices have shown a year-over-year decline.
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Pending Contract Prices
The median price of homes under contract is $393,000, down 1.5% from the previous week. Despite this weekly dip, prices are still 3.1% higher than they were a year ago. However, this year-over-year price increase has been narrowing throughout the year.
Price Reductions and Market Signals
Currently, 38.3% of listings have experienced price cuts, the highest rate for any recent July. This trend underscores how sensitive the market is to mortgage rate changes. Should mortgage rates decline further, it could lead to fewer price reductions as buyer demand strengthens.
What to Watch in the Second Half of 2024
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Inventory Movements
A key trend to monitor is whether the inventory will continue to rise, as it did late last year, or if it will level off, as typically happens in the summer months.
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Mortgage Rate Trends
The direction of mortgage rates will be crucial. A further decline could boost demand and pending sales, which might stabilize or reduce the number of price cuts.
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Price Trends
As we move past the peak buying season, overall home prices are likely to decline. The compression in price increases seen this year suggests that if demand picks up, the year-end prices could range between 0-3% higher than last year.
Bottom Line
The U.S. housing market is at a potential inflection point. With mortgage rates showing signs of stabilizing below 7%, we could see increased buyer activity and a reduction in price cuts.
However, much depends on the trends in inventory levels and mortgage rates in the coming months. For now, cautious optimism is warranted as we watch how these factors play out in the second half of the year.