Different experts have varying opinions on the current state of the housing market in the latter half of the year. While some like Glenn Kelman, chief executive of Redfin, predict an improvement in the market due to hitting rock bottom in the first quarter of 2024, others like Jeff Ostrowski, a housing analyst at Bankrate.com, are less sure about the market’s prospects for growth.
One significant factor influencing the housing market is the mortgage rate lock-in effect, according to senior economist Orphe Divounguy from Zillow. This effect kept homeowners with low mortgage rates from listing their homes to avoid financing at higher interest rates. However, recently, there has been an increase in newly listed homes and available inventory, indicating a shift in this trend.
Despite a slight decrease in mortgage rates, there hasn’t been a surge in competition among buyers. Affordability remains a top concern for buyers, with rates staying above 7% for a significant period. Rising home prices amid limited inventory pose a challenge for potential homebuyers, potentially offsetting any relief from lower interest rates.
While the number of transactions in the housing market might have slowed down, prices remain on an upward trajectory. The median home sale price in the U.S. saw a 4.4% increase from the previous year, with expectations of another record high for home prices in the upcoming summer. Some metropolitan areas have seen prices soften but had significant price growth during the Covid-19 pandemic, making affordability a persistent issue for buyers.
Certain metropolitan areas in the U.S., such as Austin, San Antonio, Fort Worth, and Portland, have experienced declines in home-sale prices. However, these areas had substantial price growth during the pandemic, making it challenging for buyers to experience significant relief in affordability. While some local markets might see softening price points, the majority are still witnessing home price growth.
Looking ahead, there are mixed expectations for the housing market. While some forecast a potential decrease in mortgage rates and a movement on the Fed funds rate by the fall of the year, the limited housing inventory and rising home prices might continue to pose challenges for buyers. It remains uncertain how these factors will shape the housing market in the latter half of the year.
The housing market is facing a complex set of challenges and opportunities, with experts divided on the direction it might take in the upcoming months. Affordability, interest rates, inventory levels, and regional price trends will all play a crucial role in determining the future state of the housing market. Buyers and sellers alike will need to navigate these dynamics carefully to make informed decisions in the current real estate landscape.