In many parts of the United States, interest rates and home sale prices refuse to go down, signifying a strong start to the sales portion of the 2024 housing market. In June, the average home price was up by four percent compared to 2023, which is the good news for sellers looking to earn top dollar. On the other hand, the number of homes sold is down 12 percent, according to RedFin. What does this mean for people who are looking to make a purchase or sell their homes in the upcoming months? Here, we break down the potential changes to the housing market to help you make the most informed real estate decisions:
Surge in Home Sales
The annual pace of existing home sales increased at the beginning of 2024, but remains below typical levels. The largest month-over-month increase in sales happened in the beginning of the year, when sales of existing homes increased by 380,000 from January to February. However, annual sales would later decrease and are facing a lower rate of sales compared to last year. The speed in which sales are being made has also increased from last year, as houses are spending less time on the market before sale.
Experts contribute the surge in sales to the drop in mortgage rates, which began declining last fall. Lower mortgage rates resulted in a decrease of the buying costs, allowing more people to plan for a purchase. This resulted in an increase of buyers, which in turn may have inspired additional sellers to take advantage of the surge in sales. As more homes go up for sale, more sales are being made as a direct reflection of the market. On the other hand, home prices continue to increase, and as a result, consumers are likely to remain sensitive to interest rate fluctuations. First-time-buyers specifically are being affected by the increase in home prices, as many are being beaten out by all-cash buyers and investors.
Shortage of Existing Homes
A major reason for the shortage of existing homes is the low rate of new homes being built. This is a cause of recent recessions that have impacted the American economy on several occasions. America has yet to fully recover from the recession of late 2007, and the 2020 COVID-19 pandemic significantly impacted the labor force and the supply of materials. As there are fewer people upsizing, downsizing, or relocating, there are fewer available homes.
More interest from buyers looking to avoid renovations
During the pandemic, home renovations were a popular activity, as remote-work became more prevalent and more time was being spent at home. However, in 2024, home renovations have been on a downward decline, with more buyers looking to avoid purchasing homes in need of remodeling. In the past, homebuyers would commonly spend money remodeling a recently purchased home, but as inflation continues, and fewer existing homes enter the market, new homebuyers and homeowners are increasingly opting to save their money.
