Americans are paying more in down payments as elevated home prices are causing prospective homebuyers to have to come up with more upfront cash to purchase properties, a Redfin analysis shows.
House prices are nearly 7 percent higher in February compared to what they were a year ago, which has contributed to the typical buyer putting down 15 percent of a purchase price compared to 10 percent the year prior.
Higher prices, though, are not the only reason making buyers pay more in the initial payment when buying property. High mortgage rates are contributing to would-be homeowners wanting to pay more of the downpayment than they might have in the past.
“A bigger down payment means a smaller total loan amount, and a smaller loan amount means smaller monthly interest payments,” according to Redfin.
To illustrate how much people are able to save when paying more in a down payment, Redfin looked at how much someone would have to spend a month on their mortgage outlays if they bought a house at the national median price of $374,500. If a buyer puts down 10 percent on a 6.79 percent rate, their mortgage payments would amount to nearly $3,000 a month. A 15 percent down payment would mean monthly payments of a little over $2,800.
Read more: What is a Mortgage? Types & How They Work
Mortgage rates have been elevated, partly due to the Federal Reserve hiking its funds rate to battle high inflation. At one point in the fall of last year, borrowing costs soared to the highest since the turn of the century. While rates have declined since then, they are still hovering around the 7 percent range, much higher than they were during and prior to the pandemic.
While elevated housing prices are contributing to buyers paying more in down payments, they may be able to afford such higher cash up front because of the value their pervious homes have accrued over the last few years as homes have become more expensive.
“Some of those people may not have the income to qualify for a large loan, but the equity they’ve built allows them to make a bigger down payment so that they can purchase the house they want with the smaller loan that they do qualify for,” Redfin points out.
Cash is increasingly becoming king
One other development that is shaping the housing market is buyers are more and more purchasing homes in all cash transactions.
More than a third of purchases, 34.5 percent to be exact, in February were paid for in cash. This is higher than last year when cash transactions accounted for 33.4 percent of purchases.
“Some homebuyers are paying in cash for the same reason others are taking out large down payments: elevated mortgage interest rates,” Redfin said. “A large down payment helps ease the sting of high rates by reducing monthly interest payments, whereas an all-cash purchase removes the sting altogether because it means a buyer isn’t paying interest at all.”
Some of these purchases are from investors but they also come from wealthier Americans who can afford to pay all-cash when buying a home. This is contributing to the crowding out of first-time home buyers, said Redfin Economics Research Lead Chen Zhao.
“High mortgage rates are widening the wealth gap between people of different races, generations and income levels,” she said.
Soaring home prices during COVID as buyers took advantage of plunging mortgage rates led to this division on who is able to buy property. To drive the point home, Redfin points out that in February all-cash purchases were nearly 3 percent higher than a year ago but sales secured through mortgages fell by nearly 3 percent.
Read more: How to Buy a House With Bad Credit
“Wealthy Americans are the only ones who can afford to buy homes. Meanwhile, people who are priced out of homeownership are missing out on a major wealth building opportunity, which could have financial implications for their children and even their children’s children,” Zhao said.
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San Diego recorded the highest year-over-year house price jump of the 20 cities under observation by the S&P CoreLogic Case-Shiller National Home Price Index, as purchase prices continue to climb nationwide.
San Diego registered a more than 11 percent jump in home prices in January. The national index which covers the nine U.S. census divisions recorded a 6 percent increase in the month across the country compared to a year ago, the fastest annual jump in two years. Another California city that saw a significant spike in home prices was Los Angeles with an 8.6 percent jump.
“U.S. home prices continued their drive higher,” Brian D. Luke, Head of Commodities, Real & Digital Assets at S&P Dow Jones Indices, said in a statement. “For the second consecutive month, all cities reported increases in annual prices, with San Diego surging 11.2%. On a seasonal adjusted basis, home prices have continued to break through previous all-time highs set last year.”
San Diego’s warm climate and availability of jobs is attractive for Americans who migrate to the area, pushing up housing demand that leads to a jump in prices, according to an analysis by moving company Qshark.
Read more: How to Buy a House With Bad Credit
The S&P CoreLogic Case-Shiller National Home Price Index is a result of a three-month moving average of home prices. Index levels are published with a two-month lag in part due to the reality that it can take up two months for a home transaction to be completed.
Elevated mortgage rates dampened demand in house prices from December, according to the S&P CoreLogic Case-Shiller Index. After declining from a peak of 8 percent in the fall, home loan costs ticked up over the last few weeks, discouraging buyers which may have helped contribute to a drop in prices over the month.
Recent data suggests that elevated mortgage rates depressed activity in the housing market. In February, new home sales plunged on the back of high borrowing costs, according to analysts.
This dynamic was reflected as well in the data from the S&P CoreLogic Case-Shiller Index as monthly, prices declined in some cities.
“On a monthly basis, home prices continue to struggle in the face of elevated borrowing costs. Seventeen markets dropped over the last month, while Minneapolis has posted a 2.4% decline over the prior three months,” according to Luke.
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But San Diego and Los Angeles still remained expensive for homes. In January San Diego saw a nearly 2 percent increase from the prior month while Los Angeles ticked up by 0.1 percent. Washington also saw a jump of 0.5 percent monthly increase.
“Only Southern California and Washington D.C. have stood up the rising wave of interest rates and deliver positive returns to start the year,” Luke said.
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Home builders are stepping back from cuts in prices as a way to attract buyers, buoyed by confidence that declining mortgage rates will boost the housing market, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).
For the fourth month in a row, builder confidence went up and at 51 in March was the highest level since July 2023. Part of the reason that they are feeling bullish about the housing market is due to an increase in demand.
“Buyer demand remains brisk and we expect more consumers to jump off the sidelines and into the marketplace if mortgage rates continue to fall later this year,” Carl Harris, NAHB chairman—and a home builder himself—from Wichita, Kansas, said in a statement.
Mortgage rates hit a peak of 8 percent in the fall of 2023, but have trended down towards the end of the year. And while they have ticked up again, last week Freddie Mac pointed out that the 30-year fixed rate had declined for another week to a little over 6.7 percent.
The NAHB suggested that falling rates and anticipation of further declines, as expectations that policymakers are set to bring down borrowing costs at some point in 2024, will spark more activity in the market.
“With the Federal Reserve expected to announce future rate cuts in the second half of 2024, lower financing costs will draw many prospective buyers into the market,” NAHB chief economist Robert Dietz said in a statement.
The anticipation of more buyers ready to explore opportunities to own homes has made builders pull back on slashing prices, a strategy they deployed in the past to spark sales.
In March, about 24 percent of builders said they reduced prices, the lowest number seen since July 2023, and down from 36 percent from December. But builders are still using this tactic to attract buyers, the NAHB said, with the average staying at 6 percent in March for the ninth consecutive month.
But builders were not without challenges. They are struggling to secure land to construct new homes, find enough workers and grappling with higher costs in the sector.
“Even though there is strong pent-up demand, builders continue to face several supply-side challenges, including a scarcity of buildable lots and skilled labor, and new restrictive codes that continue to increase the cost of building homes,” Harris said.
More demand for building, may contribute to a jump in prices for key products.
“As home building activity picks up, builders will likely grapple with rising material prices, particularly for lumber,” Dietz said.
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The sales of existing homes plunged last year amid soaring mortgage rates and elevated prices even as new-property sales fared better, according to Wells Fargo economists, a dynamic that made buying a home unaffordable for large swaths of Americans.
The high cost of home loans helped reduce sales of existing homes in 2023 by 19 percent, in what Wells Fargo analysts say was the “second straight steep annual decline” for the housing-market segment. Sales of new houses, however, increased by nearly 4 percent for the year.
Mortgage rates skyrocketed over the course of last year, peaking at a two-decade high of 8 percent in the fall. The cost of home loans soared due to the Federal Reserve’s hiking of interest rates in response to accelerating prices, which at one point turbocharged to 40-year highs. The central bank’s tightening of monetary conditions sparked a jump in borrowing costs for everything in the U.S. economy, including mortgages.
Charlie Dougherty, senior economist at Wells Fargo, told Newsweek that mortgage rates shot up quickly, from around 3 percent in 2021 to 7 percent in a relatively short time. A rapid jump in price increases also outpaced incomes, which made it challenging to buy a home.
“All of those factors kind of contributed to the downdraft in home sales that we saw in the resale market last year,” he said.
Wells Fargo pointed out that the S&P Core Logic National Home Price Index (HPI) rose nearly 50 percent from January 2020, far surpassing the 18 percent increase in household incomes during the time span.
High mortgage rates and elevated prices didn’t only impact buyers; they also made sellers reluctant to put their homes on the market, Dougherty said.
“Most sellers are also buyers. So if there are affordability issues constraining your ability to buy a new home, that’s going to weigh down on supply as well,” he told Newsweek. “The one impact of higher mortgage rates is that if you refinanced over the past few years or maybe you bought a house and got a mortgage with a very low rate, you’re probably not really all too excited about getting rid of that low monthly mortgage payment.”
The outlook going forward could shift amid a drop in the cost of home loans. On Thursday, Freddie Mac’s weekly average for the 30-year fixed rate declined to 6.74 percent from 6.88 percent a week earlier.
“The 30-year fixed-rate mortgage decreased again this week, with declines totaling almost a quarter of a percent in two weeks’ time,” Sam Khater, Freddie Mac’s chief economist, said in a statement.
Wells Fargo economists forecast that rates will decline further in anticipation of the Federal Reserve’s reduction of borrowing costs at some point this year, as inflation slows. They forecast the 30-year rate would come down to about 6.5 percent by the end of the year, and decline further in 2025, to 5.85 percent.
The latest signals have given hope for an improved market. The existing-homes market started the year with about a 3 percent jump in sales and mortgage applications have also increased, even though they still run below 2023’s activity.
“There’s some signs that the recent small drop in mortgage rates has sort of enlivened demand again,” Dougherty said.
But a drop in borrowing costs may not solve the affordability crisis that has gripped the housing sector. Wells Fargo points out that home values are now about five times higher than median household incomes.
“Mortgage purchase applications have been more-or-less flat so far in 2024 and continue to run slightly below last year’s pace. This indicates that home sales are likely to remain tepid over the next several months,” Wells Fargo economists said in their analysis.
But a decline in mortgage rates could unlock the existing-homes market, as those sellers sitting on their current low home loans may feel comfortable to finally sell their property. Wells Fargo expects this year’s existing-home sales to rise to 4.3 million and jump by 400,000 more in 2025 from the 4.1 million seen last year.
Also, new homes may also help the market, as sales are forecast to increase to a 721,000-unit pace in 2024, as buyers chase availability and affordability in that segment, Wells Fargo economists said.
Yet, with prices expected to stay elevated, the housing market may take a while to fully rebound.
“If the home prices continue to go up, then maybe affordability doesn’t improve all too much where it would allow home sales to really jump back to the pace that we saw in 2021, for example,” Dougherty said. “Moving forward, you can expect some relief in terms of affordability, but overall, because of higher home prices, you know kind of keeping a limitation on activity, you’re not very likely to see a forceful recovery.”
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Homebuyers could feel the pinch in an already-tight housing market as rising construction costs may lead to pricier homes after the National Federation of Independent Business (NFIB) reported that construction prices rose in February.
The Consumer Price Index came in higher than expected at 3.2 percent on Tuesday, still higher than the Federal Reserve target of 2 percent. The central bank has raised interest rates to a more than two-decade high to slow inflation, which worries small business owners, the NFIB survey showed. The increased borrowing costs have made business investment expensive as loans costs have jumped.
High prices have also made the cost of building homes more expensive. Home prices have gone up amid elevated mortgage rates, making owning a home unaffordable for many households in the U.S. In January, prices shot up by nearly $7,000 as the median price of a sold home was at about $420,000. The average sales price was $534,300, according to government data. High costs of construction could be one reason prices are elevated, along with low supply in a market that is seeing high demand for homes.
The NFIB survey revealed that price hikes were 42 percent higher in February in the construction sector, with 8 percent of small businesses reporting lesser price increases.
“While inflation pressures have eased since peaking in 2021, small business owners are still managing the elevated costs of higher prices and interest rates,” Bill Dunkelberg, NFIB’s chief economist, said in a statement.
Builders have been taking advantage of the low inventory of homes, and with the expectation that interest rates may come down at some point this year, they are more optimistic of the sector in 2024, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).
Fewer builders are cutting prices, the data shows, as buyers who are particularly rate sensitive are seeing home loans costs tick down from their peak last fall.
“While mortgage rates still remain too high for many prospective buyers, we anticipate that due to pent-up demand, many more buyers will enter the marketplace if mortgage rates continue to decline this year,” NAHB Chairman Alicia Huey said last month.
But costs and the lack of enough workers are of particular concerns, the NFIB showed. Job openings were 6 percent higher in February compared to the previous month.
These are the challenges that will likely shape the sector going forward, according to builders.
“As builders break ground on more homes, lot availability is expected to be a growing concern, along with persistent labor shortages,” NAHB Chief Economist Robert Dietz said in February. “And as a further reminder that the recovery will be bumpy as buyers remain sensitive to interest rate and construction cost changes, the 10-year Treasury rate is up more than 40 basis points since the beginning of the year.”
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Bozeman, Montana, a small city of about 56,000 people, has seen home prices soar on the back of increased migration to the area, catapulting demand for properties.
A single-family home in the area rose by nearly 40 percent to more than $1.16 million as of February, according to the Bozeman Real Estate Group.
The city saw demand jump 60 percent starting in 2021 as home sales increased by 50 percent. The Bozeman Real Estate Group saw interest in properties in the area substantially grow, with queries from people looking to relocate in the area shoot up 300 percent, with helped turbocharge prices. In January, prices peaked at $1.85 million, according to data from Realtor.com.
“The steady increase in buyers, combined with the lowest number of homes for sale that we had ever seen, drove the price of a home in Bozeman up faster than you can say powder day,” the real estate firm said in a recent report.
The median sale price of a home, which incorporates single-family properties, condos and townhomes, has increased by 24 percent to $820,000 as of February, compared to a year ago. That’s way above the national median sale price of a home, which is at about $418,000, according to data from the U.S. Census Bureau.
The company said that out-of-state wealth, with buyers willing to pay cash for properties, was one of the reasons why home prices have increased. The COVID-19 pandemic accelerated trends of Americans who earn big-city salaries moving to Bozeman, a rural city, bringing with them the purchasing power of a San Francisco and New York resident.
“Bozeman is rural, there’s no doubt about that. But does a rural location matter when there are Zoom Meetings and Google Hangouts along with direct flights to 21 major metropolitan areas?” the Bozeman Real Estate Group said. “Throw in a global pandemic, and all of a sudden working remotely from a place like Bozeman seems like a pretty good idea.”
What’s happening in Bozeman is a microcosm of some of the trends in the housing market across the U.S. Low supply of homes has escalated competition for properties, shooting up prices. Added to the mix, elevated mortgage prices have made owning a home expensive for millions of Americans.
In Bozeman, like in other parts of the country where mortgage rates are elevated to around 7 percent, demand has slowed, which has contributed to some decline in prices. In 2023, rates soared to about 8 percent, the highest in two decades.
“In 2023 the rising interest rates brought some relief with prices decreasing slightly, but they are still high compared to national housing prices,” Bozeman Real Estate Group said. “With the slowdown in the market, we aren’t seeing multiple offers and homes going for over asking as much. Prices are coming down as a result, but we have not seen a drastic drop.”
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A low supply of homes, which escalated competition among buyers, helped push total home values by trillions of dollars in America, a new analysis by real estate platform Redfin showed.
The U.S. market saw houses add $2.4 trillion, a 5 percent jump in worth, bringing total value for homes to $47.5 trillion, the largest increase in nearly a year, Redfin said.
High mortgage rates has made homes expensive for buyers and stifled demand. On Wednesday, home loan applications for the week ending February 23 fell by nearly 6 percent as borrowing costs have risen above 7 percent over the last few weeks, lenders said.
“Higher rates in recent weeks have stalled activity,” Mike Fratantoni, Mortgage Bankers Association’s chief economist, said in a statement.
Purchase activity was low, Fratantoni said, although applications for the buying of new homes increased compared to a year ago.
“This disparity continues to highlight how the lack of existing inventory is the primary constraint to increases in purchase volume. However, mortgage rates above 7 percent sure don’t help,” he added.
Stifled supply is a key reason why home prices have jumped and heightened worth to properties, according to Redfin.
“America’s homeowners are sitting pretty. They’re holding a massive amount of housing wealth, despite lackluster demand from buyers, because home values skyrocketed during the pandemic and now a supply shortage is preventing those values from falling,” Redfin Economics Research Lead Chen Zhao said on the company website.
But buyers are seeing a market—with those jumps in value and elevated mortgage rates—that makes owning a home increasingly out of reach for them.
“Prospective buyers aren’t as lucky. The combination of elevated mortgage rates, high home prices and a limited pool of homes for sale means homeownership is about as unaffordable as ever,” Zhao said. “One bright spot for buyers is that mortgage rates should start declining before the end of 2024.”
Redfin pointed out that the average value of a home in December went up by about $17,000 to roughly $495,000 in December compared to the same time a year ago.
Newark and Camden, New Jersey, saw double-digit rises in value, helped by the shift in remote working, as people who work in New York City migrated to nearby states, able to secure more flexibility with their work. Similar dynamics could be seen in Milwaukee, Wisconsin, and Grand Rapids, Michigan, which saw homes gain nearly 10 percent in value.
But large metro areas like New York, New Orleans and Austin, Texas, saw some declines in value. These places share a common trait, according to Redfin.
“They’ve become unaffordable for many homebuyers, so home values no longer have much room, if any, to rise, because there’s a cap on demand,” Redfin pointed out.
Suburbs saw their homes gain more in value compared to urban areas, again partly due to the shift from cities by buyers during the COVID-19 pandemic.
“While cities have bounced back to some extent as employers have asked workers to return to the office, many Americans still work remotely, incentivizing homebuying and building in far-flung, affordable areas,” Redfin said.
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San Diego saw a nearly 9 percent house price increase on a yearly basis in December, part of broad gains in the month, according to the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, as mortgage rates declined from their two-decade highs in the fall.
Seventeen of the 20 major metro areas under the index showed price jumps. Los Angeles and Detroit, for example, also reported significant value gains at 8.3 percent on a yearly basis. For 20 cities measured by the index, prices in December jumped by more than 6 percent, higher than the previous month’s 5.4 percent. For the nine U.S. census divisions, house prices increased by 5.5 percent, up from 5 percent in November. The national index recorded a decrease of 0.4 percent in December, the data showed.
House prices have overcome significant headwinds in 2023, said Brian D. Luke, Head of Commodities, Real & Digital Assets, at S&P Dow Jones Indices, with elevated mortgage rates keeping buyers and sellers away from the market.
“However, on a seasonally adjusted basis, the S&P Case-Shiller Home Price Indices continued its streak of seven consecutive record highs in 2023,” Luke said in a statement. “Ten of 20 markets beat prior records, with San Diego registering an 8.9 [percent] gain and Las Vegas the fastest rising market in December.”
Twenty markets showed annual price increases for the first time in 2023, with four registering a more than 8 percent jump.
“The term ‘a rising tide lifts all boats’ seems appropriate given broad-based performance in the U.S. housing sector,” Luke said.
Mortgage rates soared to 8 percent in October in what was the highest level since the turn of the century. This was partly due to the Federal Reserve hiking its funds rate aggressively to battle record-high inflation. The central bank’s interest rates now sit at a two-decade high of 5.25 to 5.5 percent, a policy reality that has pushed up borrowing costs across the economy including for home loans.
“House prices rose solidly in 2023 after declining from mid-2022 to the beginning of 2023 amid surging interest rates, high inflation, and a bear market in stocks,” Bill Adams, chief economist for Comerica Bank, said in a note shared with Newsweek.
The 5.5 percent price gains seen in 2023 in the index were above the national trend of about 5 percent, even though it was lower than in previous years, according to Luke.
“While we are not experiencing the double-digit gains seen in the previous two years, above-trend growth should be well received considering the rising costs of financing home mortgages,” Luke said.
The rise in the cost of mortgages could have been a factor in prices in the fourth quarter of 2023, he added.
“In the short term, meanwhile, we should be able to measure the impact of higher mortgage rates on home prices. Increased financing costs appeared to precipitate home price declines in the fourth quarter, as 15 markets saw lower values compared to September,” Luke said.
But the solid price gains seen last year helped Americans feel more confident about the economy, Comerica’s Adam said.
“House prices are the biggest component of household wealth for middle-income Americans. Their stabilization and then increase in 2023 helped Americans feel better about their household financial situation and boosted consumer confidence,” he said.
He added: “Comerica forecasts for house prices to rise 2.3% in 2024 by the Case-Shiller index, rising a bit slower than average hourly earnings, as more newly-built housing supply comes to market and more homeowners who have been waiting to move or downsize start to take the plunge.”
Update 2/27/24, 2:10 p.m. ET: This story was updated with comments from Bill Adams and a chart.
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Insufficient supply of homes in the market is pushing up prices, Wells Fargo economists said, making it tougher for Americans to afford a home amid elevated mortgage rates.
The median sale price of an existing home rose by more than 5 percent in January, according to the National Association of Realtors, even as sales rebounded from their previous months’ doldrums to jump by more than 3 percent. But the housing market still faces a supply crunch. Properties available for sale at current prices equate to about three months of supply, lower than last month and even lower than in November.
The sale price for a home came in at a little over $379,000 on the back of limited supply in January, a record high.
“[It marked] the highest sales price ever for the month of January and the seventh consecutive month of year-over-year price gains,” Wells Fargo economists pointed out.
Mortgage rates declined to mid-6 percent from their record peak in the fall of 2023, but they have ticked back up in recent weeks. On Thursday, Freddie Mac revealed that the average 30-year fixed rate was at nearly 7 percent.
Buyers took advantage of lower rates toward the end of last year and the beginning of 2024, which contributed to a jump in prices. But high mortgage rates are also stifling supply, adding to the price pressure.
Nearly 90 percent of homes in America have rates below 6 percent, according to real estate platform Redfin, which means sellers are reluctant to relinquish the cheaper home loans and enter a market where a 30-year fixed rate for a home is above 7 percent.
“With homebuyers taking advantage of lower mortgage rates, low levels of inventory have kept upward pressure on prices,” according to Wells Fargo. “The combination of relatively higher mortgage rates and higher home prices will continue to make housing less affordable to many potential homebuyers.”
The outlook for the housing market depends on what happens with the borrowing costs in the coming months. The Federal Reserve instituted aggressive rate hikes to battle soaring inflation. The increases made loans expensive, including mortgages. At their last meeting, policymakers signaled that they are done with increasing rates from their current 5.25 to 5.5 percent as inflation cools.
Experts expect the market to improve when the rates come down.
“We expect rates to resume their decline later in the year as the Federal Reserve’s rate cuts draw closer,” Nancy Vanden Houten, lead U.S. economist at Oxford Economics, said on Thursday in a note shared with Newsweek.
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Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Used home sales in the West accelerated in January, according to the National Association of Realtors (NAR), part of a national trend that saw sales rebound to their highest levels since August, a positive sign for a section of the housing market that has struggled amid high borrowing costs.
The West experienced a sales jump of more than 4 percent last month to 730,000 and increased by nearly 3 percent compared to a year ago. The Northeast saw sales stay the same from December, but were down nearly 6 percent from last year.
The Midwest saw sales increase by more than 2 percent, though it was lower than last year by more than 3 percent. The South recorded a 4 percent increase in sales in January, but decrease of 1.6 percent from a year a
Overall, at the national level used home sales rose by 3.1 percent though on annual basis they were close to 2 percent lower, NAR data showed.
The used homes market has suffered as mortgage rates soared to 8 percent—the highest level in two decades. Sellers who own properties under cheap home loans were “locked in” to those mortgages and have been reluctant to give them up and enter a market with historic levels of rates. That stifled supply, which in turn escalated competition among buyers and helped push up prices.
Over the past few weeks, rates declined to the mid-6 percent range and coincided with the jump in sales of 4 million homes last month.
“Mortgage rates tumbled from late October through mid-January, propelling sales as shoppers capitalized on lower costs,” Danielle Hale, the chief economist at realtor.com, said in a note.
Housing economists are hoping that the rise in sales in January may signal a more dynamic used homes market for the rest of the year.
“While home sales remain sizably lower than a couple of years ago, January’s monthly gain is the start of more supply and demand,” Lawrence Yun, NAR’s chief economist, said in a statement. “Listings were modestly higher, and home buyers are taking advantage of lower mortgage rates compared to late last year.”
Inventory jumped in January and was also higher than at the same time a year ago by more than 3 percent, coming to nearly a million homes, NAR data showed.
But prices across the regions continued to be elevated, with the median used home price jumping by more than 5 percent to $379,100
“The median home price reached an all-time high for the month of January,” Yun said. “Multiple offers are common on mid-priced homes, and many homes were still sold within a month. The elevated share of cash deals—32%—indicated a market full of multiple offers and propelled by record-high housing wealth.”
Outlook of used homes market for 2024
Economists suggested that with the Federal Reserve expected to slash borrowing costs in the coming months, the used home sales may see more activity compared to last year.
“As the Fed prepares for their first rate cut in years, investors should expect mortgage rates to fall by the end of this year, providing a catalyst for an improving residential real estate market later this year,” Jeffrey Roach, chief economist for LPL Financial, said in a note shared with Newsweek.
Listings have been trending up, according to real estate agents, as some sellers are taking advantage of rising prices to offload their properties.
“Our forecast is for home sales to trend higher in 2024 to a pace of 4.2 million by [the fourth quarter],” Nancy Vanden Houten, a lead U.S. economist at Oxford Economics, said in a note shared with Newsweek.
Some analysts say the January sales illustrated that the market was maybe getting back to normal.
“January saw some normalization of existing home sales after very weak sales in late 2023. Even so, the January sales rate was depressed compared to the 5.33 million average in 2018-2019, not to mention the surge to 6.13 million units in 2021,” Bill Adams, chief economist for Comerica Bank, said in a note.
Despite increased inventory, unsold homes were only sustainable for a 3-month supply, lower than in December, though a tad higher than at the same time a year ago, as sellers are still staying put in their low mortgages.
But the scarcity of used homes creates an opening for builders.
“The low supply of existing homes will likely create an opportunity for homebuilders eager to meet consumer demand,” Roach said.
Part of a rise in demand for housing is due to changing nature of how Americans live and work, according to Adams, a trend that is likely to shape the housing market going forward.
“Housing is quite expensive in the United States as people spend more time at home and less in offices and stores,” he said. “This fundamental change in how Americans spend their days will likely keep demand strong and house prices relatively expensive.”
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