The real estate market is currently experiencing an interesting phase characterized by increased inventory and shifting demand patterns. According to Lawrence Yun, NAR’s Chief Economist, "The market is at an interesting point with rising inventory and lower demand." This dynamic offers both challenges and opportunities for home buyers and sellers alike.
Market Insights: Rising Inventory and Buyer Hesitation
Recent data from the National Association of REALTORS®' Pending Home Sales Index, a forward-looking indicator based on contract signings, indicates a 2.1% decline in pending home sales in May, marking a 7% drop from the previous year. Despite this, the total housing inventory at the end of May surged by nearly 19% compared to the same period last year, as per NAR’s latest existing-home sales report. This increase in inventory provides buyers with more options than before.
Price Movements and Future Expectations
While the market adjusts, there are positive signs regarding home prices. Median existing-home sales prices in May reached a record high of $419,300. Yun suggests that the supply and demand shifts may lead to easing home price appreciation in the coming months, potentially making it a favorable time for buyers.
The recent decrease in home sales can be attributed to higher home prices and a significant rise in mortgage rates, which exceeded 7% last month. The sales of newly built single-family homes also dropped by 11.3% in May. However, Carl Harris, Chairman of the National Association of Home Builders, remains optimistic, citing substantial unmet demand and the expectation that mortgage rates will moderate in the coming months.
Optimistic Projections for the Future
Despite the fluctuations, the outlook for the housing market remains positive. Economists forecast a robust performance for the remainder of this year and into the next. Yun notes, "The first half of the year did not meet expectations regarding home sales but exceeded expectations related to home prices. In the second half of 2024, look for moderately lower mortgage rates, higher home sales, and stabilizing home prices."
Existing-home sales forecast
Housing starts forecast
Median existing-home prices forecast
Median new-home price forecast
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