U.S. Housing Market Report: Trending Data Suggests Key Indicator Stagnation & Softening Home Market Nationally

Rising housing inventory and 7% 30-year fixed mortgage rates are likely contributors to a flat median listing price. As inventory rises, homes are taking longer to sell, placing downward pressure on home prices over the remaining months of 2024. This is coupled with normal seasonality, as home prices tend to decrease in the last half of every year.

However, realtors do not seem to be perplexed by the current state of home prices. Alex Saltalamacchia, Managing Director of Brooklyn at BOND New York observed that “After significant volatility in recent years, prices in Brooklyn seem to be stabilizing, with some increases and bidding wars particularly noticeable in the luxury segment.”

“Surprisingly, pricing has maintained value, due in part to lower-than-normal inventory and continued but moderate demand,” said BOND New York Director of Brokerage Services Douglas Wagner. “The difference this year is continued steady contract activity, with between 175 and 225 contracts being signed weekly in Q2, with prices holding steady for most resales.”

Keller Williams New York City Licensed Salesperson Yan Gladkov feels that asking prices revolve around interest rates, and that they will rebound, or if need be, lowered. “As soon as there is a significant interest rate drop the buyers will snap like a catapult effect to the residential market causing the prices to be bid upwards yet again. On the other hand, if the interest rates remain where they are now or rise even higher, then the prices will have to be adjusted downward until the buyers can actually afford to qualify to make the purchase.”

According to Realtor.com, available home inventory has been growing, with more homes for sale this year compared to last year for 36 consecutive weeks (since mid-November 2023). This is good news for homebuyers (i.e. more options to choose from) but July Realtor.com spreadsheet data shows that YOY active listing count growth has been stagnant for two months (YOY gains pegged at 35%+). So, inventory is increasing but not skyrocketing as it did in 2022. This is likely due to single-digit gains of new supply hitting the market. 

But, despite a tight environment, certain market segments still exhibit dynamism. “The demand for luxury properties remains robust, driven by both foreign investors and high-net-worth individuals seeking prime real estate,” said Saltalamacchia. “Brooklyn’s appeal as a desirable living destination, coupled with its unique blend of historic charm and modern amenities, continues to attract affluent buyers.”

Does this assessment extend to other areas of the market? “Inventory for the spring selling market built up slowly through Q2, and the market saw its highest inventory period right around the Memorial Day holiday period,” said Wagner. “Inventory levels, contracts signed and home pricing seems very much on track with the same period in 2023, if volume and deal velocity is off by just a couple of percentage points.”

However, the July 9th Realtor.com June 2024 Monthly Housing Market Trends Report states that inventory was down 32.4% overall compared with typical 2017-2019 pre-pandemic levels. That being said, a July 9th ResiClub article shared that Texas (4.6% 5-year change), Idaho (4.3% 5-year change) and Florida (0.4% 5-year change) were the states that had returned to pre-pandemic (2019) inventory levels at the end of June. This is significant, because in May, only Texas’s inventory had returned to pre-pandemic levels. 

The ResiClub article also reports that inventory levels in the Northeast and Midwest are returning to pre-pandemic levels relatively slowly. And according to a July 3rd Redfin Press Release, Texas metros Austin (-2.1% YOY), Dallas (-1.5% YOY) and San Antonio (-0.2% YOY) were the major cities areas experiencing most significant YOY-median-sale-price decreases during the four weeks ending June 30th.

“The sellers that saw the usual seasonal opportunity in the spring market took advantage of it. It is common to experience a slowdown in the summer for sales, too,” said Gladkov. “Also, there are more sellers on the sidelines, undecided and yet still unmotivated to list their property because they see that some comparable homes are selling now at 2017 prices.”

Inventory levels are an indication of U.S. housing market home pricing health. If inventory begins to surge, downward pressure is placed on home prices. In contrast, when inventory is stagnant, home prices tend to rise.

Realtor.com spreadsheet data shows that new listings rose 6.4% YOY for the week ending July 20th. New listings have lost momentum since the beginning of May, only rising in single-digits, except for the week ending June 29th (+10.8% YOY).

“Heading into Q4, there are promising signs that interest rates will fall, which is expected to boost activity across all segments of the market. Lower interest rates typically lead to increased affordability for buyers, encouraging more transactions and stimulating market activity,” said Saltalamacchia. “Sellers, in turn, may be more inclined to list their properties, anticipating a larger pool of potential buyers. This dynamic is likely to create a more balanced market environment, fostering healthy competition and providing opportunities for both buyers and sellers.”

“Looking ahead to fall, either 10-year treasury yields dip below 4% or the Fed actually announces its first interest rate cut in more than 2 years, and lenders will be able to bring mortgage rates into the 6 percentiles down from their nearly 8 percent apex last autumn,” said Wagner. “Either scenario will unlock an untold amount of pent-up demand for homebuyers who will enter the market, and anyone who has postponed listing their property in New York City will finally find a hot market to jump into feet first.”

The Realtor.com housing trends report states that homes took five days longer to sell on average for the week ending July 13th YOY, the largest increase since August 2023. The Realtor.com spreadsheet data shows that homes have been spending relatively more time on the market YOY for the past 10 weeks. This is an anomaly, because from October 2023 through March 2024 houses were selling faster compared to the previous year. Houses taking longer to sell contributes to the rise in inventory.

“Currently, I see offers from buyers being pre-approved around 6.5%,” said Gladkov. “Increase in inventory is usually followed by higher competition for the sellers.”

“If there are no rate cuts–and this is entirely possible–the fall selling season will probably look a lot like the spring selling season of slightly lower inventory, slightly lower transaction volume, and continued competition for the most choice properties,” said Wagner.

The Realtor.com spreadsheet data shows that the number of price reductions compared to 12 months ago increased 46.4% for the week ending on July 20th. The number of price drops has been higher compared to the previous year for over 20 consecutive weeks.  

“In hotter markets, buyers and sellers have become used to limited price negotiability, and this spring that margin was as wide as 4.5% to 6% off the asking price for properties that had languished on the market,” said Wagner. 

“The price reductions vary due to the fact that some sellers still choose to list on the higher end of the pricing range that their listing agent has recommended them to launch the listing for sale at,” said Gladkov. “Therefore, we may see a much larger delta variation due to contract signed price being negotiated even lower than the current estimated fair market value which in this case would be closer to the estimated median range.”

According to a July 24th Freddie Mac report, high rates have impacted the housing market “as millions of homeowners locked into previously low mortgage rates and are content to remain in their current homes, therefore helping to keep inventory low.” Freddie Mac states this mortgage rate lock-in is happening due to the fact that nearly 6 out of 10 borrowers have a mortgage rate at or below 4%, therefore housing inventory is relatively low. The Realtor.com spreadsheet data shows that for the most part, new listings have been increasing by less than 10% since May, further impacting housing supply.

Mortgage News Daily lists a 30-year fixed mortgage rate of around 6.90% for the past few days, but this is a far-cry from a 4% rate. Although average 30-year fixed mortgage rates are currently below the October 2023 peak of about 8%, housing affordability is a key issue due to record high home prices and elevated rates.

“Some buyers are waiting for the prices to drop. Some buyers are waiting for interest rates to drop,” said Gladkov. “Almost all buyers actually look at the monthly payments (common charges, taxes which are maintenance in coops, insurance and utilities combined with principal and interest payments) and therefore, if the numbers do not make sense to them financially, they simply tune out regardless of the prices and or interest rates.”

A July 18th Mortgage Bankers Association survey reveals that the number of mortgage purchase applications for a single-family home decreased by 14% YOY for the week ending July 12th. Extrapolating from data supplied by the National Association of Realtors, The Associated Press reported on June 21st that existing home sales fell 0.7% in May compared to April. The damage has extended to the new home building industry; a June 20th FreddieMac report states that, due to high mortgage rates, “Homebuilder confidence reversed course in May, declining 6 points to 45, according to the National Association of Home Builders’ Housing Market Index. The decline is below the threshold of 50, indicating poor building conditions over the next six months.”

“With respect to interest rates, the shift in expectations from what many thought would be a year of multiple interest rate cuts now seems to be at most two before the end of the year,” said Wagner. “How these factors will impact the market into the fourth quarter remains to be seen.”

Major U.S. housing market indicators show that asking prices are flat, inventory is up, homes are sitting on the market longer, and price reductions have risen from last year. All these metrics point to a softening market, but the situation could change during the remainder of 2024.

“If a homeowner cannot get their asking price in order to pull the equity out and be able to buy something else that fits their future needs, well then they feel stuck in terms of the sales market,” said Gladkov.  “Unless the interest rates come down significantly which should allow the buyers to offer sellers a higher price for their home and the sellers are able to afford to buy another property.”

“There continues to be destabilizing factors that are driving uncertainty in the market,” said Wagner. “Right now, these factors are mostly keeping the market steady but at a slower pace, with a lot of buyers and sellers still on the sidelines waiting for the uncertainty of the election, international conflicts, and interest rates to come to some sort of resolution.”

In our next article, 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.