The US housing market has been on a wild ride in recent years. Supercharged by record-low interest rates and fierce competition, home prices skyrocketed. But 2023 brought a shift – rising mortgage rates and broader economic concerns cast a shadow of uncertainty. Now, in 2024, many are wondering: are home prices finally stabilizing or settling down?
The National Association of Realtors just released data showing sales of existing homes surged 9.5% in February to a seasonally adjusted annual rate of 4.38 million, the largest monthly increase since February 2023. Sales declined 3.3% from the previous year.
The median existing-home sales price elevated 5.7% from February 2023 to $384,500 – the eighth consecutive month of year-over-year price gains. The inventory of unsold existing homes increased 5.9% from one month ago to 1.07 million at the end of February, or the equivalent of 2.9 months' supply at the current monthly sales pace.
Additional housing supply is helping to satisfy market demand,” said NAR Chief Economist Lawrence Yun. “Housing demand has been on a steady rise due to population and job growth, though the actual timing of purchases will be determined by prevailing mortgage rates and wider inventory choices.”
Are Home Prices Finally Stabilizing?
Experts are offering a range of forecasts, reflecting the ongoing volatility. Some, like CoreLogic and Wells Fargo, predict modest price increases in the ballpark of 1-2%. Others, like Realtor.com and Moody's Analytics, anticipate a flat market or even a slight decline. This disparity highlights the complexity of the current market and the difficulty of pinpointing exactly where prices are headed.
While the current market leans towards sellers with low inventory, there are signs of a potential shift. Rising interest rates may incentivize some homeowners to list their properties, increasing supply and potentially tempering the rapid price growth seen in previous years. This could lead to a more balanced market where buyers have more options and some leverage in negotiations.
Mortgage rates remain significantly higher than the historic lows of 2020-2021. This significantly impacts affordability, particularly for first-time homebuyers. While lower prices might be welcome, the higher financing costs create a new set of challenges. This factor could lead to fewer bidding wars and a more measured pace of sales compared to the frenetic market of recent years.
What Does This Mean for Homebuyers?
For hopeful buyers, a stable housing market could be a welcome change. While some price softening is possible, it's unlikely to be a dramatic drop. Affordability will still be a challenge due to higher interest rates, but competition may ease, creating more opportunities for serious buyers who were priced out in the previous market frenzy.
The future trajectory of the housing market depends heavily on external economic factors like inflation and the Federal Reserve's interest rate policy. If rates continue to climb, it could further cool price growth. However, a strong job market and ongoing underlying housing demand could still prevent prices from plummeting. The key will be how these forces play out in a delicate balancing act.
Thus, the 2024 housing market is likely to be one of moderation, not dramatic swings. While home prices may not plummet, significant growth is also unlikely. This could be a good time for buyers who were priced out in previous years, as long as they can qualify for mortgages at current interest rates. Careful budgeting and a strong understanding of affordability will be crucial for navigating this new market landscape.
Should this hold you back from investing today? Absolutely not. We are at or near the bottom of the (national) real estate market and there are many opportunities available today. Prospective homebuyers and Investors should prioritize staying up-to-date on local market trends. This is especially important because national forecasts may not reflect the nuances of specific regions or neighborhoods.