Featured Architect, Álvaro Siza Vieira | Colien House
_________________________________________________________________________________
Signs of New Normalcy?
Inventory is up and the economy is headed for a soft landing. When’s the last time you heard that? It’s been a while, but availability is better (as is the economy) and this could, indeed, be a turning point for both buyers and sellers. According to Sam Khater, Chief Economist at Freddie Mac, “Our recent moderation in home price growth and increases in housing inventory are a welcoming sign for potential home buyers.” If you look back to January, inventory has been creeping up with more homes on the market. Some of that is new construction. And some of that is because of elevated home prices or buyer skepticism. Whatever the case, the increase bodes well.
Inventory of New Homes
Month’s Supply of Newly Built Homes, Seasonally Adjusted
Source: Census
Number of Homes for Sale Rising in 2024
Active Monthly Listing Count, in Thousands
Source: Realtor.com
_________________________________________________________________________________
A Key Shift in the Market
Another significant development is the recent drop in mortgage rates, which now sit at around 6.4%, down from over 7.5% earlier this year. This decline (influenced by the Federal Reserve’s actions and rising unemployment) is making home buying more affordable.
Inventory Is a Relative (& Regional) Thing
As we’ve emphasized in previous editions of In The Black, not all real estate is created equal—and local and regional markets can vary widely. Nationally, inventory is up about 36% compared to last year, but still down nearly 30% from pre-pandemic years. The South and West have seen the most significant increases, while the Northeast remains tight with inventory still 40-50% lower than in 2019. This variation merely underscores the importance of understanding your local market.
Inventory Up Most in the South and West
Regional Inventory Change, Percent YOY vs Pre-Pandemic (2017-2019)
Source: Realtor.com
Home Values Remain Strong
Despite concerns about potential price corrections, the general consensus among experts is that home prices will continue to appreciate, albeit at a more moderate pace. By the end of 2024, we’re expected to see a 3-5% increase in home prices, with a similar trend forecasted for 2025. While some regional markets may experience slight declines, others could see continued growth.
2024 Home Price Forecasts
Percent Appreciation as of 08/05/2024
2025 Home Price Forecasts
Percent Appreciation as of 08/05/2024
What It All Means
From the numbers, it appears buyers are gaining power and sellers must adapt. With more homes on the market and mortgage rates slightly declining, buyers are starting to regain some negotiation power. For families or individuals who’ve been waiting for better conditions, this might be the sweet spot to make a move. As for sellers, they need to ensure their homes are priced correctly and in good condition to attract these more discerning buyers. While homes are still selling relatively quickly, the dynamics are shifting. And as some experts suggest (including Lawrence Yun of the National Association of Realtors), we could see further rate cuts this year, which would likely spur more home sales and keep upward pressure on prices.