Here’s a brief summary of the National Association of Realtors (NAR) mid-year housing update.
Economic snapshot:
Inflation has been decelerating since late 2022. Core and headline CPI are trending back towards the Federal Reserve’s 2% target. This should allow for future interest rate cuts. In fact, most economists expect the first cut to be in September 2024.
30-year mortgage rates have been hovering around 7%……. sometimes dipping down into the 6’s and sometimes popping up towards 8%. There is noticeably less demand for mortgage loans when rates move towards 8%. As we dip below 6.5% activity perks up. The bottom line is that borrowers are getting used to higher rates.
Despite high interest rates and home prices, mortgage delinquencies are back down to pre-Covid levels. A repeat of the housing crash of 2008/2009 doesn’t appear likely at all.
Housing snapshot:
Home sales remain lackluster amid a high interest rate environment and economic/geopolitical uncertainty. 2024 is on track to match last year.
A bright spot in the housing market is growing inventory. Notice how existing home inventory (in red) is starting to trend higher after years of declines. Vastly shrinking inventory is mostly due to the LOCK IN EFFECT. New home inventory (in blue) is steadily increasing.
Home prices remain elevated despite high interest rates. The median home price sits just above $400,000 – basically at all time highs. Lack of inventory is mostly to blame.
Something has to give, right? Let’s take a look at home prices and time on market. Once a home has been on the market for more than 90 days, it is seeing nearly a 10% price cut at close. Price cuts on listed properties are rising. Will it turn into a buyer’s market?
First time homebuyers are really feeling the pinch. With elevated home prices and high interest rates, the average monthly mortgage payment has never been higher – almost $2,250/mo for a median-priced home.
The annual household income required to buy a median-priced home is also at all time highs, over $100,000. Affordability is a big challenge presently.
For existing homeowners, things are looking brighter. Recent home price appreciation since Covid has all 50 States showing double digit gains. Florida home price appreciation since Covid is at a whopping 66.4%. How did your state do?
Real estate has always been a great wealth builder. Existing homeowners enjoy a net worth many times that of a renter. Recent home price appreciation since Covid has really ramped up the net worth of homeowners.
Full NAR presentation can be viewed/downloaded HERE.
