State of the U.S. Housing Market, February Recap

According to Realtor.com’s February 2024 Monthly Housing Market Trends Report from March 5th, 2024, the spring housing market may offer more affordable properties than 2023 due to a substantial increase in newly listed homes. Also, median listing price growth has slowed, and the share of price drops rose to the highest February levels since 2019. However, Realtor.com emphasizes that “overall inventory still remains less affordable and more scarce than previous pre-pandemic years.”

Realtor.com also notes a 14.8% increase in active listings this February compared to the same time frame last year, “marking the fourth consecutive month of annual inventory growth.” Mortgage rate relief and forthcoming economic factors will impact the U.S. housing market’s trajectory.

“Most major lenders now have competing products offering rates in the low 6%, or high 5% zones, usually as adjustable-rate loans, some of which require buyers to buy down less than one point at closing,” said Freedman.

“If inflation gets closer to the 2% target rate the government looks for, then they will hopefully loosen the reins on the interest rates,” said Edry. “My hope is that by the start of Q3, we’ll begin to see the rate cuts. That will open the spigot and the built-up pressure of buyers waiting on the sidelines will begin to be released.”

Referring to the Realtor.com active listing count graphic, February’s inventory levels reached a three-year high with 664,716 more homes for sale nationwide, though still lower than 2017–19 levels. This surge in listings is a positive sign, though the market remains historically restrained.

Considering the impact of current inventory levels on the housing market dynamics, what might this mean for the upcoming spring housing market?

“We believe there is quite a bit of pent-up demand to sell homes, and sellers have been waiting on the sidelines hoping for interest rates to come back down,” said Freedman. “Recent statistics have shown that with the gradual increase in residential inventory this quarter, the market is reaching a point of balance, where it is neither a buyers’ nor a sellers’ market, but it’s becoming a level playing field where both sides can expect to do equitable business.”

Referring to Realtor.com’s pending listings graphic, pending listings decreased by 0.8% compared to 2023, yet surpassed 2017–19 levels. Despite a 15% increase in houses for sale YOY, the U.S. housing market remains competitive, with more homes under contract despite fewer available for sale compared to 2017–19.

Referencing Realtor.com’s newly listed homes graph, new listings increased by 11.3% YOY but remain considerably lower than in 2017–18. This suggests that homeowners with lower mortgage rates are still reluctant to sell in a higher rate environment.

This lock-in effect is gradually easing as new listings have increased. However, buyers still hope for inflation to ease, employment to remain strong, and home prices to decrease, thereby expanding options in the current market. The trajectory of the U.S. housing market should rise throughout the remainder of March and subsequently over April and May, traditionally the most robust months of the national home buying season. 

“We’re going into our third year of a protracted down housing market, which is mostly because of inflation,” said Freedman. “We all follow the news about the strong labor market, with improving consumer confidence and high levels of discretionary spending nationwide with hope that such strong economic indicators should have a more positive effect on the housing market.”

“We’ve seen this play out in the real estate market: After a flurry of contracts and deals to start the new year, there has been a bit of pullback and more questions about waiting until the 2nd half of the year when interest rates are projected to dip to around 6%,” said Edry. “Still, we’re seeing more strength in the market than last year at this time.”

According to Realtor.com, homes spent an average of 61 days on the market in February, four days less than in 2023 and 17 days less than the average February in 2017–19.

The national median list price increased from $409,500 in January 2024 to $415,500 in February, marking a 0.3% increase compared to the same period last year, yet remaining relatively flat. According to Realtor.com, the required household income to qualify for purchasing a medium-priced home rose by $4,400 to $86,100 to cover mortgage payments, along with the auxiliary costs of taxes and homeowners insurance.

What does this mean financially? Buying an existing medium-priced home at $400,000 brings an average property tax rate of 1.25%, adding $5,000 per year; coupled with average insurance costs of $125 per month or $1,550 per year, the total monthly payment, including principal and interest mortgage payments, is $545.

When accounting for property taxes and homeowners insurance, it becomes evident that the qualifying amount for mortgage approval surpasses $100,000, not $86,000. Of course, costs vary depending on whether the buyer is purchasing a new or existing home, the overall price, and the area.

So, what does the March 5th Realtor.com data suggest, and what other factors may be impacting the U.S. housing market?

According to a March 7th, 2024, Fortune report, the number of newly listed houses for sale recently experienced the largest YOY increase since May 2021. Also, a March 4th, 2024, Newsweek article noted a rising share of price reductions. In a March 5th, 2024, article, The Mortgage Reports stated that new listings and price reductions have collectively contributed to a significant increase in housing inventory. More inventory provides more options for homebuyers, thereby tempering home price growth.

According to the March 7th, 2024, Realtor.com Weekly Housing Trends View – Data Week Ending March 2nd, 2024, median listing prices remained steady compared to last year, with new listings up by 17.4% this week compared to 2023. Active inventory increased, with for-sale homes 19.9% higher than year-ago levels, and homes spent two days less on the market compared to the previous year.

For data supporting these conclusions, visit the Realtor.com data library, click on the “Weekly Inventory” button, then select “View US Data” to download the spreadsheet. 

Median listing prices have shown slight YOY increases every week since July but are now plateauing. YOY median listing price changes have been on a downward trend so far this year, suggesting potential declines in asking prices due to both falling median listing prices and the uptick in price reductions. This trend could lead to decreases in home sold prices as well.

Active listings experienced the largest annual increase since May 2023. There have been more homes for sale in 2024 compared to 2023 for 17 consecutive weeks, providing more options for buyers while limiting home price increases. Inventory is up due to declining home buying demand and a rise in new listings.

Realtor.com data showed a 17.4% rise in new listings, marking the largest increase since May 2021, extending a 19-week streak of consecutive increases. Despite this surge, new listings are still 110,000 below pre-pandemic levels. 

“Inventory remains low in many parts of the country,” said Edry. “This is in part due to a continued lack of new construction that peaked during the supply chain crisis but has been a general trend since the Great Recession. Combine that with all the homeowners who locked in super-low interest rates over the last few years that they don’t want to lose if they move, and it’s unlikely to see any sort of large supply of homes hit the market in the near future.”

Realtor.com’s median days on market data shows that houses are selling faster for 22 consecutive weeks, whereas before that, it took longer to sell a house for 58 consecutive weeks. Quite a juxtaposition. Also, Realtor.com indicates a 31.9% increase in the count of price reductions from last week, marking six consecutive weeks of YOY price reduction gains, with the acceleration continuing each week.

As mentioned earlier, expensive mortgage rates, taxes, insurance, limited housing inventory, and tight competition for available properties this spring season will undoubtedly impact U.S. housing market sales. 

“Nationally, we see homeowners who would like to trade up or down just remaining in place and not selling, because they don’t want to leave a mortgage with an interest rate which is likely well below 3.5 or 4% to take on a more expensive property at an interest rate which is guaranteed to be above 6, and sometimes even 7%,” said Freedman.

Prices are up 40% from 2019, pricing many buyers out of the market, leading them to refrain from purchasing due to affordability hurdles.

New listings are well below 2021–22 levels, as stated in the Realtor.com March 5th report. The current number of homes for sale remains relatively unchanged compared to the start of the year, with a marginal 0.4% year-to-date growth versus a 13% decline, falling by 59,000 from the start of last year. Inventory is still lower than pre-pandemic levels, down 39% compared to the same week in 2019.

“We’re seeing a bit of an odd supply/demand equation where both sides are on the low side, but the lack of inventory (low supply) is more extreme than the lack of demand (aka, buyers sitting on the sidelines),” said Edry. “That should keep prices up even while fewer than normal sales take place. As long as inventory remains low, housing affordability will continue to be an issue for buyers—especially would-be first-time homeowners.”

If prices remain elevated and mortgage rates stay above 7%, affordability will continue to be a significant hurdle for homebuyers throughout 2024. In light of the current challenges in the U.S. housing market, how will the housing market evolve in the coming months?

“Odds are that we’re past the bottom of this market cycle, but the upslope will be less dramatic than many thought,” said Edry. “More homes will be sold this year than last; however, it will be far from the highs of the pandemic era market. I expect we’ll continue to see volatility where some months will be stronger than expected and then some will be surprisingly weaker. That could mean continued opportunities for buyers; sellers who price their properties well will still do well, too.”

“We are optimistic that there will be an improved spring home selling season due to years of pent-up demand,” said Freedman. “Some people are tired of waiting and they simply need to get on with their lives, and we’re already seeing them entering the market to figure out their best opportunities. Even if the Fed only cuts rates twice this year and stops, it will send a message of confidence into the home buying and mortgage markets that can’t arrive fast enough for most of us in the business!”

Homebuyer demand has been inconsistent due to mortgage rate volatility. According to the March 18th, 2024, Mortgage News Daily rate index, mortgage rates for a 30-year fixed-rate loan are at 7.11%. Although average mortgage rates have decreased by 1.1 percentage points since October 2023, rates remain twice as high as the 3% rates seen in 2020–21, limiting the number of sellers listing homes for sale and keeping inventory well below 2019 levels. 

Although the U.S. housing market is highly rate-dependent, economic factors such as inflation, unemployment, housing inventory and the balance between housing supply and demand will become increasingly significant as 2024 progresses.

“The worst part about the current inflation situation is how stubborn and slow the recovery back to lower levels has been,” said Freedman. “Unfortunately, high consumer demand and low levels of new construction have pushed housing prices and rents to record highs in most markets. This prevents buyers from being able to afford the housing they need and want, and it has caused quite a bit of stagnation in local real estate markets around the country.”

“Inflation rates have been steadily coming down which led to some optimism at the start of 2024 that the economy was heading for a ‘soft landing,’” said Edry. “Many in the real estate industry expected interest rates to drop significantly—especially as the Fed had indicated they’d have three rate cuts. However, that mood has been tempered of late as inflation rates haven’t come down as quickly as expected.”

In our March recap, HAVEN will take a further look at the numbers: how the current U.S. housing market is reacting to prevailing economic factors influencing real estate.