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THREE SIGNS THE HOUSING MARKET IS GETTING BETTER
The housing market appears to be on the verge of a positive shift, offering a renewed opportunity for buyers after a prolonged period of challenging conditions.
This improvement follows a tumultuous few years for the US housing market, marked by home sales plummeting to a 30-year low in 2023 and mortgage rates soaring to multi-decade highs.
However, buyers re-entering the market may soon encounter more favorable conditions compared to 2023.
Here are three indicators that experts believe point to better prospects for buyers.
RISING INVENTORY
The housing market is finally seeing an increase in inventory, which could help reduce prices. Over the past few years, buyers have faced a severe shortage of available homes, limiting their choices and driving up prices.
According to the National Association of Realtors, unsold housing inventory increased by 16% year-over-year in April, reaching 1.2 million. While this is still below the desired levels, it marks an improvement from 2023 when sellers were reluctant to list their homes due to lower mortgage rates secured in previous years.
DROPPING HOME PRICES
Increased inventory has the potential to lower home prices as the market rebalances. In April, the median US home price hit a record high of $387,600. However, prices are beginning to decline in key metropolitan areas with higher rates of new home construction.
"The boom is over, in part because many people have been priced out. Now, homes are sitting on the market, and price growth is stagnating," noted a recent report from a listings site.
DECREASING MORTGAGE RATES
The 30-year fixed mortgage rate has declined over the past six months. According to Freddie Mac, borrowing costs for the most popular US mortgage recently eased to just over 7%, down from a peak of 7.79% in late 2023.
High mortgage rates have been a significant hurdle in the housing market, deterring both buyers and sellers from making transactions. However, these rates, influenced by overall economic interest rates, could continue to decrease as the market anticipates potential Fed rate cuts.
The Federal Reserve has indicated it won't reduce interest rates until it is confident that inflation is returning to 2%. With consumer prices cooling to 3.4% in April, there are signs that inflation is reaching a more reasonable level.
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