After several weeks of steady mortgage rate declines, many potential buyers are now finding homeownership within closer reach. Although home prices continue to hit record highs, the pace of price growth is slowing due to rising inventory and softer demand.
Buyers are also gaining more negotiating power with sellers.
Despite this, some buyers are waiting on the sidelines, hoping for additional rate cuts from the Federal Reserve after a significant rate reduction in September.
Experts, however, suggest that now might be the best time to enter the market before a possible surge in demand puts upward pressure on prices again.
2024 and 2025 Housing Market Forecast
According to the latest S&P CoreLogic Case-Shiller Home Price Index, U.S. home prices showed a 5% annual gain in July, down from the 5.5% gain in June. Though the pace of growth has slowed, home prices remain high, leaving many buyers priced out of the market.
According to the latest S&P CoreLogic Case-Shiller Home Price Index, U.S. home prices showed a 5% annual gain in July, down from the 5.5% gain in June. Though the pace of growth has slowed, home prices remain high, leaving many buyers priced out of the market.
As mortgage rates decline, experts believe home price growth could slow further as more sellers enter the market. However, there’s also a possibility that a demand rebound could lead to a resurgence in home price growth by the end of the year.
Looking Ahead to 2025
A true recovery in the housing market will depend on several factors, including a significant rise in available homes. Lower mortgage rates are helping to increase supply gradually, but experts like Keith Gumbinger, vice president of HSH.com, warn that rapidly falling rates could reignite demand and push prices higher again.
A true recovery in the housing market will depend on several factors, including a significant rise in available homes. Lower mortgage rates are helping to increase supply gradually, but experts like Keith Gumbinger, vice president of HSH.com, warn that rapidly falling rates could reignite demand and push prices higher again.
Though 2025 could bring some improvement in affordability, Gumbinger predicts only moderate gains, as inventory levels and mortgage rates will play crucial roles.
Changes in NAR Practices: What Buyers and Sellers Need to Know
The National Association of Realtors (NAR) has agreed to a $418 million settlement related to antitrust lawsuits, resulting in new rules that aim to make the home-buying process more transparent.
The National Association of Realtors (NAR) has agreed to a $418 million settlement related to antitrust lawsuits, resulting in new rules that aim to make the home-buying process more transparent.
As part of the changes, buyers will now need to enter into written agreements with their agents before touring homes, and buyers can negotiate the commission they pay their broker.
Impact on Affordability
These changes may place additional financial burdens on buyers with limited resources for down payments and closing costs.
These changes may place additional financial burdens on buyers with limited resources for down payments and closing costs.
However, some sellers may continue to offer commission compensation to buyer representatives to attract more buyers.
Housing Inventory Forecast: Will Supply Grow Enough to Lower Prices?
While the number of homes for sale has increased, it remains below pre-pandemic levels. Many homeowners are hesitant to sell, as they are locked into low mortgage rates.
While the number of homes for sale has increased, it remains below pre-pandemic levels. Many homeowners are hesitant to sell, as they are locked into low mortgage rates.
Rick Sharga, CEO of CJ Patrick Company, believes a significant increase in inventory won’t happen until mortgage rates fall back to the low 5% range, likely after 2024.
Home Builder Sentiment
Home builder confidence rose slightly in August thanks to declining mortgage rates, marking the first positive movement since March.
Home builder confidence rose slightly in August thanks to declining mortgage rates, marking the first positive movement since March.
However, builder sentiment remains low, reflecting concerns over high construction costs. Experts predict that new housing starts may increase in the coming months, contributing to much-needed inventory.
Real Estate Sales Stats
Existing home sales dropped 2.5% in August, despite the national median home price increasing by 3.1%. New home sales also saw a 4.7% drop from July but were up nearly 10% from the previous year.
Existing home sales dropped 2.5% in August, despite the national median home price increasing by 3.1%. New home sales also saw a 4.7% drop from July but were up nearly 10% from the previous year.
Pending home sales showed only a slight improvement, as buyers continue to hold out for more significant rate reductions.
Affordability Outlook for Fall 2024
With mortgage rates and prices cooling, hopeful buyers might find more opportunities this fall. The median mortgage payment dropped by 2.7% in mid-September, signaling improved affordability. However, many buyers still face high home prices and may need to get creative in finding homes that fit their budgets.
With mortgage rates and prices cooling, hopeful buyers might find more opportunities this fall. The median mortgage payment dropped by 2.7% in mid-September, signaling improved affordability. However, many buyers still face high home prices and may need to get creative in finding homes that fit their budgets.
Economists like Danielle Hale of Realtor.com advise first-time buyers to explore lower-priced homes, as builders are adjusting to affordability challenges by constructing smaller homes. This shift may offer more options for budget-conscious buyers heading into 2024.