Sing along with today’s housing market, but be sure stay on tune

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Published Date 2/5/2024

Follow the bouncing ball. Those old enough to know what that means (an outrageously popular 1960s sing-along TV show) have probably lived in all the homes they intend to have owned. Those who don’t wonder whether the 2024 housing is just bouncing back and forth, leaving them uncertain.

According to a recent Realtor.com report and Margaret Heidenry, there have been some signs of housing inventory recovering, with the number of homes actively for sale growing by 7.9% year over year in January, That’s “notably higher compared to last year,” according to Realtor.com Chief Economist Danielle Hale.

Add to that the fact that mortgage rates have also subsided from their 23-year high, and you’d think the ball is going in the right direction. Despite this double dose of promising news, however, Hale doesn’t expect that America’s housing affordability crisis will improve all that quickly. She predicts it will take a few baby steps forward, and maybe one or two back.

“While gradually falling mortgage rates are helping slow the cost to purchase a home, the housing market will likely bounce back and forth between improvement and status quo over the next several months,” she explains.

And then there is the pre-and-post-pandemic number for just about everything, right? While housing inventory may be up annually, it is still down compared with typical pre-pandemic levels from 2017 to 2019 by a whopping 39.7%. So it’s all relative.

The Fed seems happier but is not yet convinced we are safe — in part because its battle against inflation is not yet over. Don’t forget that it raised interest rates to bring inflation down. And while it doesn’t set mortgage rates, mortgage rates generally follow the same trajectory as the Fed’s short-term interest rates.

“Recent economic data showing stubborn prices and a strong labor market create uncertainty over the direction of Federal Reserve decisions, and mortgage rates in the near term,” explains Hale. “In order to see mortgage rates drop more significantly, we need to see more evidence that inflation is slowing and that the economy is on a sustainable path. Mortgage rates have been in a rough holding pattern because the data have been relatively mixed recently.” Today, a buyer will pay about $108 more to finance 80% of the typical home than they would have a year earlier, according to Heidenry.

On to pricing — those arbitrary numbers that have remained more or less in limbo but have yet to drop, inching up 1.4% higher this January than a year earlier, to $409,500. “And even though mortgage rates have fallen from their peak in October, median monthly mortgage payments for January have increased compared with this same month last year,” says Heidenry.

Bottom line: Hale warns that holding off on buying until that moment arrives might not be a wise strategy. “Waiting for prices to fall is a tough position to be in,” explains Hale. “While these figures are above historic norms, which does open up the possibility that we may see declines to bring them back in line with typical ranges, when exactly that will happen is tough to pinpoint.” For some, Hale says this will mean that it makes more sense to rent. For others, it will mean that buying makes more sense.

Take heart, though. Inventory is on the rise and more homes to choose from might bring welcome relief to buyers. “Home shoppers looking for warmer climes during these frigid months are especially in luck, with inventory up 11.5% in the West and 1.9% in the South” says Heidenry. The South, in particular, is rising again — especially active in terms of better listing trends, according to Hale. Metros that saw the most inventory growth included Memphis, TN, New Orleans, Orlando, San Antonio, Austin, and Dallas.

Realtor, TBWS

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