Real Estate Rundown March 2024

Photo credit John-Schnobrich Via Unsplash

An Optimistic Outlook on The Housing Market

The housing market in the United States at the beginning of 2024 is marked by cautious optimism amid fluctuations in mortgage rates. Despite recent increases, there is hope for a drop in rates, potentially boosting activity in the sluggish housing market. Economic indicators show a booming economy, but the Federal Reserve signals a cautious approach to cutting benchmark interest rates. Fannie Mae anticipates modest growth in existing home sales and new single-family housing starts. While existing home sales dipped slightly, increased mortgage applications and pending home sales suggest a modest rebound. With low existing home supply, demand for new homes remains strong. Fannie Mae forecasts a slight decrease in mortgage origination volume for 2024 but predicts growth in 2025. However, softening economic growth is anticipated due to factors such as low savings rates and potential labor market cooling. Overall, uncertainties persist regarding economic sustainability, inflation, and monetary policy changes post-pandemic.

Largest Uptick for New Listings in 3 Years

In the U.S. housing market, there has been a notable uptick in new listings of homes for sale, marking the most significant increase in nearly three years. This rise, alongside stable total inventory levels for the first time in nine months, offers a glimmer of hope for homebuyers who have been contending with low inventory and high mortgage rates. Despite this positive shift, housing costs remain historically high, with the typical mortgage payment nearing last October's record. Consequently, pending sales have experienced a notable 8% decline, the largest drop in five months, and mortgage-purchase applications have fallen for the fourth consecutive week. However, increased house hunting activity is evident, as shown by Redfin's Homebuyer Demand Index reaching its highest level since last September. There's optimism that pending sales could rebound in the coming months if mortgage rates stabilize and new listings continue to increase. Real estate experts advise potential buyers to act now while there's a slightly larger inventory and potentially less competition, with the possibility of negotiating prices or receiving concessions from sellers amidst the current market conditions.

Mortgage Rates Fall Flat

Mortgage rates have maintained their volatility, ultimately stabilizing at levels seen a week ago, with investors eagerly awaiting further insights into inflation trends. Despite some easing towards the Federal Reserve's two percent target, both consumer and producer price inflation accelerated in January, suggesting a delay in anticipated rate cuts by the Fed. This delay is reinforced by strong economic data from January, which has heightened concerns about disinflation stalling. Consequently, demand for long-dated Treasury notes has remained subdued, exerting continued pressure on yields and mortgage rates, which have been on an upward trend since the end of December. With the upcoming release of the Personal Consumption Expenditures (PCE) report expected to bring further rate volatility, market participants are bracing for potential shifts in inflation expectations and their impact on mortgage rates.

Pending Home Sales Dip in January

Pending home sales in the United States experienced a notable decline of 4.9% in January 2024, according to recent data from the National Association of Realtors (NAR). While the Northeast and West regions saw slight monthly gains in transactions, the Midwest and South recorded losses, with all four regions marking year-over-year decreases. The Pending Home Sales Index (PHSI), a key indicator based on contract signings, dropped to 74.3 in January, reflecting an 8.8% decrease compared to the previous year. NAR Chief Economist Lawrence Yun noted that despite a solid job market and record-high total wealth, consumer sensitivity to mortgage rate changes is impacting home sales. Regional breakdowns indicate varying trends, with Southern states and the Rocky Mountain time zone experiencing faster job growth and increased long-term housing demand, contingent on mortgage rates and inventory availability.

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