Home buying Agencies Struggle High mortgage charges coupled with Record Prices in the Year 2024

Introduction

Following a dismal spring season and with a bleak outlook for the summer and fall, the housing market is showing few signs of emerging from its three-year slump.

After a dip late in the previous year, home buyers were optimistic going into 2024 that mortgage rates would continue to decrease. However, better-than-expected inflation and economic data cast doubt on when the Federal Reserve may decide to lower interest rates.
For the first time since November, the average rate on a 30-year house loan rose above 7% by April. Many prospective homeowners were compelled to put their house hunt on hold indefinitely due to this and record-high home prices.

Economists predict that mortgage rates will have decreased by year’s end. However, more than a slight drop in rates might be required to attract buyers and convince homeowners that now is a good time to sell.

Housing market’s performance

Here are some major themes influencing the housing market’s performance so far this year and what sellers and buyers might anticipate in the latter half of 2024:

On average, over one-third of all properties sold in a given year are purchased between March and June. This is the time of year when people purchase homes, and things haven’t been going well lately.

Compared to the same period last year in 2022 and 2023, sales of previously inhabited U.S. residences decreased between March and June. This year, sales fell in March, April, and May, and June had a dip as well.

The average 30-year mortgage rate is currently hovering around 7%, the supply of available homes is historically low, and home prices are at record highs, which contribute to the poor spring sales and the affordability issues that many prospective homeowners confront.

As per Freddie Mac, the mortgage buyer, the average rate for a 30-year mortgage is 6.95%. That is more than twice as much as it was at the beginning of July 2021.

Mortgage rates are impacted by a number of variables, such as changes in the 10-year Treasury yield, which lenders use as a benchmark when pricing house loans, and the bond market’s response to the Fed’s interest rate policy.

In June, Federal Reserve officials indicated that they expected to lower their benchmark interest rate at least once this year, citing recent inflation that has approached the bank’s target level of 2%.

More homes were for sale at the end of May compared to August 2022, which might benefit buyers this summer. The bad news is that the number of houses for sale in the country is still far lower than before the outbreak.

Before COVID struck, there wasn’t much housing available for purchase in the United States because of more than ten years of below-average new home development and demographic factors that encouraged homeowners to hold onto their properties for longer.

Conclusion

The significant difference in mortgage rates between now and three years ago (3%) has deterred many homeowners who were able to secure extremely low rates from selling; this phenomenon is known in the real estate industry as the “lock-in” effect.

As per the National Association of Realtors, the national median sales price of a previously inhabited home increased 5.8% in May over the same month the previous year to $419,300, the highest amount ever recorded on data dating back to 1999. It’s also increased by 51% in only the last five years.

However, the rate of price increases is decreasing. The US had its lowest price increase since October in May, increasing 4.9% from the previous year, according to CoreLogic’s house price index. By May of next year, the real estate data tracker predicts that the growth in national home prices will have slowed to 3%.