The housing market in June 2024 is presenting a mixed bag of signals. While affordability remains a challenge for many buyers due to stubbornly high mortgage rates, there are signs that a shift might be underway. Let's delve into the key data points to understand what this means for you.
This past week saw mortgage rates climb back over 7%, throwing cold water on the hopes of many potential buyers. This, coupled with home prices that remain slightly higher than last year, continues to make homeownership a tough nut to crack for many.
There's a glimmer of hope on the horizon though. According to Realtor.com's latest weekly data, for-sale inventory continued to improve in May, with a significant 35.2% increase in available homes compared to the same period last year. This rise is partly due to a surge in affordable listings, with a whopping 46.6% year-over-year increase.
Interestingly, despite flat year-over-year home prices, the price per square foot has inched up by 3.8%. This suggests a potential trend towards smaller, more manageable homes entering the market, catering to budget-conscious buyers.
The South seems to be leading the charge in this regard. This region boasts a greater availability of these smaller, affordable homes compared to the national average.
While the rise in inventory is a positive sign, it's important to maintain perspective. Compared to pre-pandemic levels, the U.S. housing market, including all four regions, is still down between 20% and 60% in terms of inventory. This suggests there's a way to go before a true market equilibrium is reached.
Home Prices and Listings Trend
Now, let's shift gears and analyze the pulse of the seller market and how it's impacting listing prices and activity.
Listing Prices: A Flattened Curve
The good news for potential buyers is that the median listing price has shown signs of plateauing. This week's data reveals a flat trend compared to last year, a welcome change after previous weeks hinted at rising prices. This moderation can likely be attributed to the increased availability of more affordable homes entering the market.
However, it's important to note that the price per square foot continues to creep upwards by 3.7% year-over-year. This seemingly contradictory trend can be explained by the ongoing inventory shortage. Despite recent gains, the overall number of homes for sale remains below pre-pandemic levels. This limited supply continues to act as a floor for listing prices, preventing a significant price drop.
Seller Activity: Taking a Wait-and-See Approach
The recent rise in mortgage rates seems to have impacted seller behavior. While new listings, a key indicator of seller activity, were up 2.1% compared to last year, this growth has slowed down compared to previous weeks. This suggests that some homeowners might be postponing putting their homes on the market, possibly waiting for a dip in mortgage rates in the coming months.
Economic data scheduled for release in the coming days, including the jobs report and inflation data, could play a crucial role in influencing mortgage rates. If these reports point towards a softening economy, it could lead to a decrease in rates, potentially encouraging more sellers to list their homes.
Homes Sitting on the Market a Tad Longer
The data also indicates that homes are taking a day longer to sell compared to last year. Time-on-market has hovered around a two-day difference year-over-year since March. This suggests a slowdown in the market pace, likely due to the combined effect of high prices and mortgage rates.
However, it's important to remember that even with this slight increase, homes are still selling faster than pre-pandemic times. This is likely due to the gradual return of inventory levels towards a more balanced market.
Regional Housing Inventory Trends
Let's delve into how inventory levels are shaping up across different regions.
The Rise of the South:
As mentioned earlier, the South is leading the charge in terms of inventory growth. This region boasts a significant 47.2% year-over-year increase in available homes, compared to the national average of 35.5%. This surge is a key factor behind the rise of affordable listings we discussed previously.
The South's advantage lies in its larger pool of smaller, more budget-friendly homes. This trend caters perfectly to first-time buyers or those looking to downsize, offering a more attainable entry point into the market.
A Look at the Other Regions:
While the South shines with its abundance, other regions are playing catch-up. Inventory levels across the board still show a deficit compared to pre-pandemic times, ranging from 20% to 60% lower depending on the region. This indicates that a return to a balanced market will likely take some time in all areas.
However, it's important not to paint a completely hom*ogenous picture. Individual markets within each region might experience their own unique dynamics. It's always wise for potential buyers and sellers to consult local real estate professionals for a more nuanced understanding of their specific market conditions.
The Takeaway for Different Players:
For potential buyers in regions with lower inventory levels, patience and persistence might be key. Staying informed about new listings and being prepared to move quickly could be crucial in a competitive market.
For sellers in these regions, your home might still attract multiple offers. However, with rising inventory levels nationally, a competitive pricing strategy might be necessary to secure a quick sale.
In the South, where affordability is a focus, sellers might benefit from highlighting the unique features of their smaller homes that cater to budget-conscious buyers.
Remember, regardless of your location, staying informed about economic data and its potential impact on mortgage rates can be empowering for both buyers and sellers.
A Look Ahead: Forecast
The June 2024 housing market presents a complex picture. While affordability hurdles remain, there are signs of a potential shift. Increased inventory, particularly of smaller, more affordable homes, offers a glimmer of hope for budget-conscious buyers. However, a return to a fully balanced market likely won't happen overnight.
So, what can we expect in the coming months? Here are a few factors to keep an eye on:
Interest Rate Rollercoaster:
The direction of mortgage rates will be a major driver of market activity. Upcoming economic data releases, such as the jobs report and inflation numbers, could significantly impact rates. A softening economy might lead to lower rates, potentially boosting buyer demand and seller activity.
Inventory Levels:
The continued rise of inventory, particularly in the South, will be crucial. As more affordable homes enter the market, it could put downward pressure on prices, making homeownership a more realistic option for many.
First-Time Buyer Activity:
With millennials entering their prime home-buying years, their influence on the market will be interesting to watch. If these young adults feel confident about the job market and see mortgage rates decline, they could be a significant force driving demand, especially for starter homes.
The Wildcard: Geopolitical Events:
Global events can introduce unforeseen elements into the housing market equation. Keeping an eye on how geopolitical factors, like the ongoing war in Ukraine, might impact the economy and interest rates will be important for anyone navigating the housing market.
The Bottom Line:
The June 2024 housing market is in a state of flux. While affordability concerns persist, positive signs are emerging. Increased inventory, particularly of budget-friendly options, offers hope for first-time buyers and those seeking more attainable housing options. As economic data unfolds and mortgage rates fluctuate, staying informed will be key for both buyers and sellers navigating this dynamic market.
