Archives for January 2024

Decline in US Home-Price Growth Amidst High Interest Rates

January 30, 2024 by Marco Santarelli

The latest data for the S&P CoreLogic Case-Shiller Indices, the leading measure of U.S. home prices, reveal a deceleration in the upward trend for November 2023. Out of the 20 major metro markets, 12 reported month-over-month price decreases.

Year-Over-Year Analysis

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 5.1% annual gain in November, surpassing the 4.7% rise in the previous month. The 10-City Composite exhibited an increase of 6.2%, up from a 5.7% increase in the previous month.

The 20-City Composite posted a year-over-year increase of 5.4%, compared to a 4.9% increase in the previous month. Notably, Detroit reported the highest year-over-year gain among the 20 cities with an 8.2% increase in November, followed by San Diego with an 8% increase. Conversely, Portland saw a 0.7% decrease for the third consecutive month, remaining the only city reporting lower prices in November versus a year ago.

Month-Over-Month Trends

For the first time since January 2023, the U.S. National Index and 20-City Composite posted 0.2% month-over-month decreases in November, while the 10-City Composite posted a 0.1% decrease. After seasonal adjustment, the U.S. National Index and the 10-City Composite saw month-over-month increases of 0.2%, while the 20-City Composite posted a 0.1% increase.

Analysis and Insights

According to Brian D. Luke, Head of Commodities, Real & Digital Assets at S&P DJI, “U.S. home prices edged downward from their all-time high in November.” The streak of nine monthly gains ended, setting the index back to levels last seen over the summer months. Notably, Seattle and San Francisco reported the largest monthly declines, falling 1.4% and 1.3%, respectively.

November's year-over-year gain marked the largest growth in U.S. home prices in 2023. The National Composite rose 5.1%, and the 10-city index rose 6.2%. Detroit maintained its position as the best-performing market for the third consecutive month, accelerating to an 8.2% gain. San Diego notched an 8% annual gain, retaining its second spot in the nation.

Notably, six cities registered a new all-time high in November (Miami, Tampa, Atlanta, Charlotte, New York, and Cleveland), while Portland remained the lone market in annual decline. The Northeast and Midwest recorded the largest gains with returns of 6.4% and 6.3%, respectively. The West showed the slowest gains at 3%. This month’s report revealed the narrowest spread of performance across the nation since the first quarter of 2021.

“The tight disparity speaks to a rising tide across the country, with less evidence of micro-markets bucking the trend,” says Brian D. Luke. The days of markets in the South rising double digits with markets in the Midwest remaining flat are over. The house price decline came at a time when mortgage rates peaked, with the average Freddie Mac 30-year fixed-rate mortgage nearing 8%, according to Federal Reserve data. The rate has since fallen over 1%, which could support further annual gains in home prices.

Future Outlook

The future outlook for U.S. home prices remains uncertain, with the recent decline in November signaling a potential shift in the market. Factors such as mortgage rates and regional disparities will likely continue to influence the housing landscape in the coming months.

Will the Housing Market Boom as Builder Sentiment Surges?

January 17, 2024 by Marco Santarelli

Mortgage rates dipping below 7% in the last month triggered a significant surge in builder confidence at the onset of the new year. According to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), builder confidence in the market for newly built single-family homes experienced a noteworthy climb, reaching 44 points in January. This seven-point increase marks the second consecutive monthly rise and closely aligns with the period of declining interest rates.

Impact of Lower Interest Rates

NAHB Chairman, Alicia Huey, a custom home builder and developer, attributes this boost in confidence to the improved affordability conditions resulting from lower interest rates in the past month. The reduced rates have enticed buyers back into the market, countering the dip in activity witnessed during the fall due to higher borrowing costs.

Huey anticipates a growth in single-family starts in 2024, contributing much-needed inventory to the market. However, she acknowledges that builders will face challenges, including building material cost and availability, along with lot supply.

Future Sales Expectations and Supply-Side Challenges

NAHB Chief Economist, Robert Dietz, highlights the substantial decrease of more than 110 basis points in mortgage rates since late October, as reported by Freddie Mac.

This has lifted the future sales expectation component in the HMI into positive territory for the first time since August. As home building expands in 2024, Dietz foresees growing challenges on the supply side, manifesting as higher prices and/or shortages of lumber, lots, and labor.

Builder Strategies Amidst Falling Rates

Despite mortgage rates falling below 7% in the past month, many builders are persisting with price adjustments to stimulate sales. In January, 31% of builders reported cutting home prices, reflecting a decline from the previous two months and the lowest rate since last August. The average price reduction in January remained at 6%, unchanged from the previous month. Concurrently, 62% of builders offered various sales incentives in January, maintaining a stable trend observed since October.

Insights from the HMI Indices

Derived from a monthly survey conducted by NAHB for more than 35 years, the NAHB/Wells Fargo HMI assesses builder perceptions of current single-family home sales and sales expectations for the next six months. The indices charting current sales conditions, sales expectations, and traffic of prospective buyers all posted gains in January, indicating an optimistic outlook. The three-month moving averages for regional HMI scores also show positive trends across different regions.

Regional Variances in HMI Scores

Examining the three-month moving averages, the Northeast witnessed a four-point increase to 55, the South experienced a two-point rise to 41, the West registered a one-point gain to 32, and the Midwest held steady at 34. These variations showcase regional differences in builder sentiment, reflecting the diverse conditions across the country.

Overall, the surge in builder sentiment in January, fueled by falling interest rates, signals positive momentum in the housing market. However, challenges on the supply side, including material costs and availability, loom on the horizon. Builders' strategic responses to lower rates, such as price adjustments and sales incentives, indicate a dynamic market. As the year progresses, keeping a close eye on regional variances will be crucial in understanding the nuanced landscape of the housing market.

Surge in Mortgage Applications Despite Holiday Season

January 10, 2024 by Marco Santarelli

Despite the holiday season, homebuyers and homeowners are rushing to secure mortgages, leading to a significant 9.9% increase in applications, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. The last week of December witnessed a drop in mortgage applications, but the overall trend indicates a noteworthy surge.

Key Insights from MBA's Weekly Mortgage Applications Survey

The Market Composite Index, serving as a gauge for mortgage loan application volume, experienced a substantial 9.9% increase, marking a 45% rise compared to the previous week. Joel Kan, MBA Vice President and Deputy Chief Economist, noted that despite an uptick in mortgage rates at the beginning of 2024, applications increased after adjusting for the holiday.

Refinance and Purchase Indices

The holiday-adjusted Refinance Index surged by an impressive 19% from the prior week, indicating a robust refinance market. Additionally, the unadjusted Refinance Index exhibited a remarkable 53% increase from the previous week and was 17% higher than the same week in the prior year. The seasonally-adjusted Purchase Index also saw a substantial rise of 6% from the previous week, indicating increased activity in the home purchase market.

Market Dynamics and Government-Backed Loans

The refinance share of mortgage activity increased to 38.3% of total applications, up from the previous week's 36.3%, showcasing the dominance of refinance transactions in the current market. The adjustable-rate mortgage (ARM) share of activity decreased to 5.4% of total applications, indicating a preference for fixed-rate mortgages.

Government-backed loans also experienced changes in market share. The FHA share of total applications decreased slightly to 14.4%, while the VA share increased to 16.3%. The USDA share of total applications decreased marginally, reflecting shifts in demand for different types of government-backed loans.

Impact of Rising Rates on Contract Interest Rates

With rising rates impacting the market, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances increased to 6.81%. Jumbo loan balances also witnessed an increase, with the average contract interest rate for 30-year fixed-rate mortgages rising to 6.98%. FHA-backed mortgages saw a similar trend, with the average contract interest rate increasing to 6.56%.

The 15-year fixed-rate mortgages also experienced a rise in the average contract interest rate, increasing to 6.41%. Meanwhile, 5/1 ARMs faced a notable increase in the average contract interest rate, reaching 6.17%. These changes in contract interest rates indicate the impact of rising rates across different mortgage products.

What Does It Mean for the Housing Market in 2024?

The surge in mortgage applications, despite the holiday season and rising rates, raises questions about the trajectory of the housing market in 2024. While the increase in both purchase and refinance applications is promising, industry experts suggest that it may be attributed to a catch-up in activity after the holiday season and year-end rate declines.

Overall market activity remains volatile, and the housing market is likely to experience fluctuations in the coming months. Homebuyers and homeowners should closely monitor market trends and mortgage rates to make informed decisions. The dominance of refinance transactions and shifts in government-backed loan preferences indicate the dynamic nature of the current real estate landscape.

The housing market in 2024 is poised for a mix of challenges and opportunities, driven by factors such as rising interest rates, consumer demand, and economic conditions. It remains essential for individuals involved in real estate transactions to stay informed and adapt to the evolving market dynamics.

Housing Market News 2024: Today’s Market Update

January 2, 2024 by Marco Santarelli

The housing market is an ever-evolving and dynamic sector that affects the economy and the lives of people worldwide. As we move into 2024, the latest housing market news is of utmost importance to individuals and businesses alike. Whether you are a homebuyer, seller, investor, or simply interested in real estate trends, staying up-to-date with the latest developments can help you make informed decisions.

Latest Housing Market News in January 2024

The 2024 housing market is poised for changes, influenced by mortgage rates, market conditions, and regional dynamics.

Mortgage Rate Lock-In Effect

The “mortgage rate lock-in effect” defined the 2023 housing market.
The pandemic-era sub-5% mortgage interest rates led to homeowners holding onto their homes.
Lower mortgage rates in late 2023 are indicating potential market improvements.

Existing-Home Sales and Prices

Mortgage rate drops boosted existing-home sales in November, breaking a five-month decline.
Housing shortages persist, but a slight uptick in single-family home construction is expected in 2024.
Home price growth varies across markets, with some areas experiencing double-digit increases.

Mortgage Rates and Affordability

Experts predict 30-year mortgage rates to hover between 6.1% to 7% in the first quarter, gradually declining throughout the year.
Election year volatility may impact mortgage rates.
Affordability challenges persist, requiring substantial household incomes to buy homes.

New Home Construction

Anticipated gain in single-family housing construction starts in 2024 after declines in 2022 and 2023.
Multifamily construction expected to experience a significant decline.
Remodeling activity to remain flat in 2024, with aging housing stock requiring reinvestment.

2024 Market Projections

Market conditions are expected to improve, but housing shortages will persist.
Nationwide sales may see a modest uptick, with variations across different markets.
Median existing-home prices continue to rise, and a dramatic rise in supply is seen as necessary to dampen price appreciation.
Weary homebuyers may welcome a more stable and less volatile market.

Challenges Faced in 2023

Home sales dropped by about 17% from their peak in February to their low in October.
Home prices increased by 7%, reaching record highs, surprising many industry observers.
Mortgage rates reached nearly 8%, the highest level in 23 years, contributing to the least affordable housing market in a generation.
Existing-home sales dipped below 4 million units, creating a market with high competition and rising prices.

Mortgage Rates and Affordability

Mortgage rates have fallen for nine consecutive weeks and are expected to drop further in 2024, though likely not below 6%.
The Federal Reserve's interest rate hikes impacted demand, contributing to the housing market's challenges.
Forecasts suggest mortgage rates averaging around 6.8% in 2024, providing some relief.

Improvements in Affordability

Average mortgage rates at 6.6% allow the average American family to afford the median-priced home without exceeding the 30% income threshold.
As rates come down, more homeowners may list their homes, increasing inventory and moderating prices.
Forecasts indicate a slight decrease in home values, with Zillow predicting a 0.2% fall, and Realtor.com forecasting a 1.7% decrease.

Expected Rise in Home Sales

NAR forecasts a 13.5% increase in existing home sales in 2024, reaching 4.71 million units.
Continued growth in new home construction is expected to boost inventory.
Predicted top-performing markets include Austin, Texas, and other metro markets in southern states.

Positive Signals in 2024

Inventory is slowly increasing, providing more options for buyers in the upcoming spring.
Sales rates are climbing, with more homes going into contract compared to the previous year.
Home prices are inching up, maintaining stability and avoiding uncontrollable rises seen during the pandemic.

Affordability Challenges Persist

Despite positive market trends, an intense affordability crisis continues to impact millions of potential homebuyers.
While cheaper mortgage rates may improve payment affordability, increased demand may drive competition, putting upward pressure on prices.
The current data suggests that the affordability crisis is unlikely to improve in 2024.

Inventory Growth and Market Dynamics

The year concluded with 513,000 single-family homes on the market, nearly 5% more than the end of 2022.
Sellers are gradually re-entering the market, contributing to a growing resale inventory.
The number of single-family homes in contract has crossed a growth threshold, showing a 2.4% increase compared to the previous year.

Price Reductions and Market Stability

Approximately 34.8% of homes on the market have undergone price cuts, within the “normal” range for the start of the year.
The percentage of homes with price reductions is expected to decrease in the coming months as fresh inventory enters the market.

Home Price Trends and Forecasts

The median price of single-family homes in the US is $415,000, reflecting a nearly 3% increase over the previous year.
2024 is projected to continue with price stability, as leading indicators, including inventory growth and sales rates, remain positive.
Q1 home price trends will play a crucial role in shaping the overall trajectory of the housing market in 2024.

While the housing market shows signs of improvement, challenges such as affordability and the delicate balance between supply and demand continue to shape the landscape in 2024.

Stay tuned for more updates on the housing market as we continue to monitor the situation. If you're looking for real estate investment avenues in 2024, get in touch with us for expert advice and guidance.

Our team of professionals can help you navigate the changing market and find the right opportunities for your needs. Don't wait, contact us today to learn more!