Whether you’re actively searching for a home or thinking about selling one, you already may know the word that many people are using these days to describe the U.S. housing market: weird, and it is likely to stay that way.
Gallup’s yearly Economy and Personal Finance Poll, published in May, shows that Americans remain “highly pessimistic” about the homebuying market: 21% told the polling company it is a good time and a whopping 76% said it was a bad time.
Gallup called these measurements the worst in its overall trend forecast, a reflection of high home values, high mortgage rates and limited housing supply. In other words, Americans talking over the proverbial fence would tell their friends and neighbors to stay out of the market for now and that they expect housing prices to increase.
Still, there is hope on the horizon for buyers, sellers and renters, says Amy Lessinger, president of Re/Max in Denver.
“Given the financial constraints, it was no shock that overall activity decreased this year. But inventory is increasing, buyer demand is strong, and we anticipate significantly more sales when rates finally come down,” Lessinger says.
Experts who are watching U.S. housing market conditions have developed some theories around what is coming next for buyers, sellers, renters and new construction for the rest of 2024.
[READ: The 10 Best House Hunting Apps in 2024.]
Buying
Mortgage rates dipped for the week ending July 18, with the average rate for a 30-year fixed home loan going from 6.89% the week prior to 6.77%, according to the latest data from Freddie Mac.
“The 30-year fixed-rate mortgage fell to its lowest level since mid-March, dropping 12 basis points from last week,” Sam Khater, Freddie Mac’s chief economist, said in a statement. “Mortgage rates are headed in the right direction and the economy remains resilient, two positive incremental signs for the housing market.”
This is good for buyers, who are still interested in getting their first or next house. But mortgage rates still feel high to many people, and record home prices continue to be a major financial hurdle for potential buyers, Lessinger says.
“The aspiration to buy is evident,” says Lessinger. “Buyers are starting to recognize that whether at 6% or 7%, homeownership is a good long-term investment. First-time homebuyers are toughing it out despite affordability challenges, understanding that a fixed mortgage payment is more stable than rising rent.”
Zillow found in its June market report that the total number of homes on the market has risen throughout the year, ticking up 4% from May to June to stand nearly 23% above last year’s low level. While inventory levels are still about 33% below pre-pandemic averages, that’s the smallest deficit since the fall of 2020, when the pool of available homes was quickly dropping.
“A growing segment of homes that aren’t competitively priced or well marketed are lingering on the market. Sellers are increasingly cutting prices to entice buyers struggling with affordability,” said Skylar Olsen, Zillow chief economist, in a statement. “For years, the housing market has been defined by fast sales and few options. Now it’s starting to look more like it did before the pandemic in terms of competition, if not costs.”
Experts predict a rate cut in September, as well as increasing inventory levels that present more options for buyers, highlighting the need for lower rates to stimulate significant growth in market activity, Lessinger says.
[These Are the Tax Breaks You Can Get When You Buy a House]
Selling
In many parts of the country, more people are placing their homes on the market, and Lessinger says Re/Max agents are starting to see homeowners with historically low rates begin to move due to life circumstances, which will always be a big driver of the market.
According to Re/Max data in the June National Housing Report, sellers are largely getting their asking prices, with buyers paying 100% of the list price for the third straight month.
“While inventory is still low on average, it is increasing. Once rates drop, we anticipate even more inventory to appear, as sellers who have held onto their homes see an opportunity to make their move,” Lessinger says.
In June, Realtor. com found the median home cost $445,000 and the typical home spent 45 days on the market. For the week ending July 13, the average home for sale spent five more days on the market compared with the same period last year.
Before listing, sellers should look to important details like decluttering, updating important spaces like kitchens and bathrooms as well as applying neutral paint to sell their home this summer into fall, says Aino Heinäsuo, head of design at Redecor.
“Focus on updating kitchens and bathrooms if budget allows, as these areas often have a significant impact on buyer decisions,” Heinäsuo says. “Consider refinishing cabinets, replacing countertops, or upgrading appliances for a modern look. Choose colors and patterns that complement the overall style of the space. In bathrooms, consider regrouting tiles and ensuring they are clean and in good condition.”
[Read: Why Summer Is the Perfect Time to Sell Your Home]
New Construction and Development
Overall housing starts increased 3% in June to a seasonally adjusted annual rate of 1.35 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The June reading of 1.35 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months.
“Lower single-family starts are in line with our latest builder surveys, which show that while builders are concerned about the current high interest rate environment, they believe that mortgage rates will moderate in the coming months and lead to higher construction in the latter part of 2024,” Carl Harris, chairman of the National Association of Home Builders (NAHB) and custom homebuilder from Wichita, Kansas, said in a statement.
Lessinger adds that high borrowing costs have slowed new construction.
“Once rates are cut, builders are likely to take advantage of the lower borrowing costs to build more homes, thereby increasing supply,” Lessinger says. “More construction to fuel housing supply is crucial to meeting the nation’s housing needs.”
Though homebuilder confidence started the year strong, it has since dropped, according to the Housing Market Index by the National Association of Home Builders and Wells Fargo, which asks builders across the U.S. how they feel about sales of new single-family houses currently and in the next six months, and the traffic of prospective buyers. Builder confidence in the market for new single-family homes fell to 42 in July, down one point from the previous month. And all three index components in July remain below the key threshold of 50:
— Present sales conditions fell one point to 47.
— Expected sales in the next six months increased one point to 48.
— Traffic of prospective buyers declined one point to 27.
[What to Do if Your Home Is Losing Value]
Renting
According to the national rent index in the June Zumper National Rent Report, one-bedrooms increased 1.5% to $1,526, while two-bedrooms grew 1.9% to $1,900.
The report notes two states where demand and prices remain high. Minimal declines to Florida rent prices amidst one of the largest supply influxes to the state demonstrate how massive the demand is there, according to the report. In all four cities in New York — Syracuse, Buffalo, Rochester and New York — annual rent rates rose by double digits, with demand crossing into surrounding markets.
But Lessinger in Denver notes this is not the case for all markets. “Rents across the country are slightly down compared to a year ago due to an oversupply of new apartments,” Lessinger says. “This oversupply, resulting from significant construction activity, is helping keep rental costs stable for now. However, because of high borrowing cost, construction overall has slowed down, which could impact rental costs in the next few years and cause them to jump.”
Florida and Texas bucked the national trend in June, according to Redfin. Asking rents fell a record 12% year over year in Jacksonville, and also declined in Tampa, Orlando and Miami. Austin, Texas, posted a record drop, too. The median asking rent in the Texas capital decreased a record 12.6% from a year earlier in June.
Florida and Texas built a lot of apartments to meet surging demand during the pandemic, so some property owners are dropping prices to compete for tenants.
Lessinger says buyers and sellers should remember real estate is cyclical, and homebuying conditions will be more attractive in time.
“We went into the year anticipating rate cuts by now, and it’s been a bumpy road on many levels, but the hunger for homeownership remains strong,” Lessinger says. “Sales will pick up over time, and that’s good news for everyone, especially younger people who’ve been sidelined by the conditions. They deserve the many benefits of homeownership.”
More from U.S. News
Why Is California So Expensive?
How to Sell Your Home Super Fast
Home Selling Slowly? Here’s What to Do
What to Expect from the Housing Market This Summer (and Fall) originally appeared on usnews.com
Update 07/25/24: This story was previously published at an earlier date and has been updated with new information.
