Unlocking Homebuyer Opportunities in 2024

There’s no arguing this past year has been difficult for homebuyers.

And if you’re someone who has started the process of searching for a home, maybe you put your search on hold because the challenges in today’s market felt like too much to tackle. You’re not alone in that. A Bright MLS study found some of the top reasons buyers paused their search in late 2023 and early 2024 were:

• They couldn’t find anything in their price range

• They didn’t have any successful offers or had difficulty competing

• They couldn’t find the right home

If any of these sound like why you stopped looking, here’s what you need to know. The housing market is in a transition in the second half of 2024. Here are four reasons why this may be your chance to jump back in.

1. The Supply of Homes for Sale Is Growing

One of the most significant shifts in the market this year is how the months’ supply of homes for sale has increased. If you look at data from the National Association of Realtors (NAR), you’ll see how inventory has grown throughout 2024 (see graph below): 

This graph shows the months’ supply of existing homes – homes that were previously lived in by another homeowner. The upward trend this year is clear.

This increase means you have a better chance of finding a home that suits your needs and preferences. And if the biggest reason you put off your home search was difficulty finding the right home, this is a big relief.

2. There’s More New Home Construction

And if you still don’t see an existing home you like, another big opportunity lies in the rise of new home construction. Builders have worked to increase the supply of newly built homes this year. And they’ve turned their attention to crafting smaller, more affordable homes based on what’s most needed in today’s market. This helps address the long-standing issue of housing undersupply throughout the country, and those smaller homes also offset some of the affordability challenges you’re feeling today.

According to data from the Census and NAR, one in three homes on the market is a newly built home (see graph below):

This means, that if you didn’t previously look at newly built homes as part of your search, you may have been cutting your pool of options by a third. Not to mention, some builders are also offering incentives like buying down mortgage rates to make it easier for buyers to get a home that fits their budget.

So, consider talking to your agent about what builders have to offer in your area. Your agent’s expertise on builder reputations, contracts, and more will help you weigh your options.

3. Less Buyer Competition

Mortgage rates are still hovering around 7%, so buyer demand isn’t as fierce as it once was. And when you combine that with more housing supply, you have a better chance of avoiding an intense bidding war. Danielle Hale, Chief Economist at Realtor.com, highlights the positive trend for the latter half of 2024, saying:

“Home shoppers who persist could see better conditions in the second half of the year, which tends to be somewhat less competitive seasonally, and might be even more so since inventory is likely to reach five-year highs.”

This creates a unique opportunity for you to find a home you want to buy with less stress and at a potentially better price.

4. Home Prices Are Moderating

Speaking of prices, home prices are also showing signs of moderation – and that’s a welcome shift after the rapid appreciation seen in recent years (see graph below): 

This moderation is mostly due to supply and demand. Supply is growing and demand is easing, so prices aren’t rising as fast. But make no mistake, that doesn’t mean prices are falling – they’re just rising at a more normal pace. You can see this in the graph. The bars are still showing prices increasing, just not as dramatic as it was before.

The average forecast for home price appreciation in 2024 is for positive growth around 3% to 5%, which is more in line with historical norms. That moderation means that you are less likely to face the steep price increases we saw a few years ago.

The Opportunity in Front of You

If you’re ready and able to buy, you may find that the second half of 2024 is a bit easier to navigate. There are still challenges, but some of the biggest hurdles you’ve faced are getting better as time wears on.

On the other hand, you could choose to wait. But if you do, here’s the risk you run. As more buyers recognize the shift in the market, competition will grow again. On a similar note, if mortgage rates do come down (as forecasts say), more buyers will flood back into the market. So, making a move now helps you take advantage of the current market conditions and get ahead of those other buyers.

Bottom Line

If you’ve put your dream of homeownership on hold, the second half of 2024 may be your chance to jump back in. Connect with a real estate agent to talk more about the opportunities you have in today’s market.

Read more at KeepingCurrentMatters.com

Related Links

• It suddenly looks like there are too many homes for sale. Here’s why that’s not quite right

• Inflation Drops Again in June, Clearing the Path to a Fed Rate Cut This Fall—and Relief for Homebuyers

• “Chaos Gardening” Is the Low-Stakes, Low-Effort Hack You Need to Try This Weekend

If there is a home that you would like more information about, if you are considering selling a property, or if you have questions about the housing market in your neighborhood, please reach out. We’re here to help.

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“Chaos Gardening” Is the Low-Stakes, Low-Effort Hack You Need to Try This Weekend

I am, by my own admission, a pretty lazy gardener.

While I love having a yard full of beautiful flowers and plants, I am not actually that interested in constantly tending to them. I’ll put the sweat equity into my veggie garden, which I plant in my raised garden bed every year, but the rest of the plants? You’re on your own, friends. 

That’s why I was immediately intrigued when I saw the term “chaos gardening” being thrown around on social media. By the sounds of it, this was a low-effort gardening method practically tailor-made for lazy gardeners like me.

The premise is simple: You gather a bunch of seeds (bonus points for native plants), mix them up, then toss them around your garden. That’s it! No planning, digging, organizing. No order. It is, in a word, chaos — and the results can be fabulous.

The first “chaos gardening” post I saw was from James Weston (@farmboyjames528), who uses the method to sow cover crops in his small plot. He says the various plants — beans, lentils, sunflowers, and more — help suppress weeds and feed the soil so his other veggies can thrive.

But the concept works great for more decorative plants, too. I loved this example from Amber (@karasumoongardens), who describes herself as a lazy gardener (my kind of girl!).

Native wildflowers are a perfect pick for chaos gardening, as they’ll thrive in your climate and you won’t have to worry about invasive species taking over. Many wildflowers don’t bloom their first summer, so sowing them now means you’ll see the fruits of your (minimal) labor next summer. 

Any annual flowers that bloom this year will re-seed, meaning they’ll essentially be planting themselves. A garden that does all the work for you? Sign me up.

Check out these tips for finding plants native to your area (and avoiding invasive species). If you want to go all-in with your native plants and ditch your lawn entirely, here’s our guide to growing prairie lawns. 

Read more at ApartmentTherapy.com

Related Links

• It suddenly looks like there are too many homes for sale. Here’s why that’s not quite right

• Inflation Drops Again in June, Clearing the Path to a Fed Rate Cut This Fall—and Relief for Homebuyers

• The Price of Perfection: Don’t Wait for the Perfect Home

If there is a home that you would like more information about, if you are considering selling a property, or if you have questions about the housing market in your neighborhood, please reach out. We’re here to help.

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It suddenly looks like there are too many homes for sale. Here’s why that’s not quite right

Anyone out shopping for a home today knows there is still precious little for sale.

The housing market is just beginning to come out of its leanest few years in history. Inventory of both new and existing homes is finally rising, but there is something suddenly strange in the numbers: The supply of newly built homes appears to be way too high.

The numbers, however, are deceiving due to the unprecedented dynamics of today’s housing market, which can be traced back two decades to another unprecedented time in housing, the subprime mortgage boom.

All of it is precisely why home prices, which usually cool off when supply is high, just continue to rise.

The supply scenario

There is currently a 4.4-month supply of both new and existing homes for sale, according to the National Association of Home Builders, or NAHB. Months’ supply is a common calculation used in the market to measure how long it would take to sell all the homes available at the current sales pace. A six-month supply is considered a balanced market between a buyer and a seller.

Supply was already low at the start of this decade, but pandemic-driven demand pushed it to a record low by the start of 2021 at just two-months’ supply. That shortage of homes for sale, combined with strong demand, pushed home prices up more than 40% from pre-pandemic levels.

Now supply is finally beginning to climb back, but the gains are mostly in the new home market, not on the existing side. In fact, there is now a nine-month supply of newly built homes for sale, nearly three times that of existing homes. New and old home months’ supply usually track pretty closely. New construction now makes up 30% of total inventory, about twice its historical share, according to the NAHB.

“June 2022 recorded the largest ever lead of new home months’ supply (9.9) over existing single-family home months’ supply (2.9),” wrote Robert Dietz, chief economist for the NAHB. “This separation makes it clear that an evaluation of current market inventory cannot simply examine either the existing or the new home inventory in isolation.”

This unusual dynamic has been driven by both recent swings in mortgage rates and an unprecedented disaster in the housing market that began 20 years ago.

The foundation of today’s tricky numbers

This housing market is unlike any other because of economic forces unlike any other. First, in 2005, there was a massive runup in home sales, homebuilding and home prices fueled by a surge in subprime mortgage lending and a frenzy of trading in new financial products backed by these mortgages.

That all came crashing down quickly, resulting in one of the worst foreclosure crises since the Great Depression and causing the ensuing Great Recession. Single-family housing starts plummeted from a high of 1.7 million units in 2005 to just 430,000 in 2011. By 2012, new homes made up just 6% of the total for-sale supply and, even by 2020, housing starts had yet to recover to their historical average of about 1.1 million units. They sat at 990,000.

Then came the Covid-19 pandemic and during that time, consumer demand surged and mortgage rates set more than a dozen record lows, so builders responded. Housing starts shot up to 1.1 million in 2021. The Federal Reserve was bailing out the economy, making homebuying much cheaper, and the new work-from-home culture had Americans moving like never before. Suddenly, supply was sucked into a tornado of demand.

Mortgage rate mayhem

The current strange divide in supply between newly built and existing homes is also due to roller-coaster mortgage rates, dropping to historic lows at the start of the pandemic and then spiking to 20-year highs just two years later. Millions of borrowers refinanced at the lows and now have no desire to move because they would have to trade a 3% or 4% rate on their loans to the current rate, which is around 7%. This lock-in effect caused new listings to dry up.

It also put builders in the driver’s seat. Homebuilders had already ramped up production in the first years of the pandemic, with single-family homes surging to more than 1.1 million in 2021, according to the U.S. census, before dropping back again when mortgage rates shot up. Builders have been able to buy down mortgage rates to keep sales higher, but as of this May, they are building at an annualized pace of 992,000.

Resale listings improved slightly this spring, as mortgage rates fell back slightly, and by June, active listings were 16.5% higher than they were the year before, according to Redfin. Some of that increased supply, however, was due to listings sitting on the market longer.

“The share of homes sitting on the market for at least one month has been increasing year over year since March, when growth in new listings accelerated, but demand from buyers remained tepid, as it has been since mortgage rates started rising in 2022,” according to a Redfin report.

Growth at the low end

On the resale market, the supply is lowest in the $100,000 to $500,000 price tier, according to the National Association of Realtors. That is where the bulk of today’s buyers are. Higher mortgage rates have them seeking cheaper homes.

Interestingly, however, while supply is increasing across all price tiers, it is increasing most in that same lower-end price tier, meaning it is simply not enough. As fast as the homes are coming on the market, they are going under contract.

For example, there is just a 2.7-month supply of homes for sale between $100,000 and $250,000, but supply is up 19% from a year ago. Meanwhile, there is a 4.2-month supply of homes priced upward of $1 million, but supply is up just 5% from a year ago.

This explains why home prices remain stubbornly high, even with improving supply. Prices in May, the latest reading, were 4.9% higher than May 2023, according to CoreLogic. The gains have begun to shrink slightly, but not everywhere.

“Persistently stronger home price gains this spring continue in markets where inventory is well below pre-pandemic levels, such as those in the Northeast,” said Selma Hepp, chief economist for CoreLogic.

“Also, markets that are relatively more affordable, such as those in the Midwest, have seen healthy price growth this spring.”

Hepp notes that Florida and Texas, which are seeing comparatively larger growth in the supply of homes for sale, are now seeing prices below where they were a year ago.

While analysts have expected prices to ease and mortgage rates to come down in the second half of this year, it remains to be seen if rates will actually come down and if the supply-demand imbalance will allow prices to cool. If mortgage rates do come down, demand will surely surge, putting even more pressure on supply and keeping prices elevated.

“Yes, inventory is rising and will continue to rise, particularly as the mortgage rate lock-in effect diminishes in the quarters ahead. But current inventory levels continue to support, on a national basis, new construction and some price growth,” Dietz added.

Read more at CNBC.com

Related Links

• Ideas for Freshening Up Your Home’s Exterior

• Inflation Drops Again in June, Clearing the Path to a Fed Rate Cut This Fall—and Relief for Homebuyers

• The Price of Perfection: Don’t Wait for the Perfect Home

If there is a home that you would like more information about, if you are considering selling a property, or if you have questions about the housing market in your neighborhood, please reach out. We’re here to help.

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The Price of Perfection: Don’t Wait for the Perfect Home

In life, patience is a virtue – but in the world of homebuying, waiting too long in hopes of finding the perfect home actually isn’t wise.

That’s because the pursuit of perfection comes at a cost. And in this case, that cost may be delaying your dream of homeownership. As Bankrate explains:

“One of the most common first-time homebuyer mistakes is looking for a home that checks each of your boxes. Looking for perfection can narrow your choices and lead you to pass over good, suitable options for starter homes in the hopes that something better will come along.”

The Cost of Holding Out for Perfection

Nothing in life is ever perfect – and that’s true when you search for a home too. Unless you’re building a brand-new home from the ground up, chances are there are going to be some features or finishes you wouldn’t have picked yourself. It may be as simple as paint colors, a light fixture, or the tile in the bathrooms or kitchen. Or even that the backyard isn’t fenced in. It could also be that the home itself is great, but it’s not the ideal location you were hoping for.

But here’s the trade-off you’d be making without even realizing it. In all that time you’d spend searching for the perfect place, you’d overlook a lot of homes that would’ve worked for you. U.S. News explains:

“. . . you may miss opportunities if you enter the process with blinders on and aren’t open-minded . . . Countless potential buyers never buy because of this, and thus miss great investments or never move on to the next chapter of their lives.”

It’s Time To Redefine Perfection

Especially with affordability and inventory where they are today, buying a home that needs some updates, is a few neighborhoods away from your ideal location, or doesn’t have all your desired features can be a smart move. Here’s why.

For starters, these homes are usually more affordable, which is important at a time when some buyers are struggling to find options in their budget.

And they give you a chance to make the space your own or discover a whole new area of town. You may find out you actually love that neighborhood. Or, swapping out a feature here or there after move-in isn’t such a big deal. So, look past the green shag carpet and see the bones of the house. With a little vision and creativity, you can turn a good house into a fantastic home.

How an Agent Helps You Explore Your Options

If you’re open to a home that needs a little elbow grease or is a bit further out, let your agent know. They’ll be happy to show you how this can really open up your pool of homes to pick from. They’ll also help coach you through this process by:

1. Prioritizing Your Must-Haves: Your agent will want to revisit your wish list and separate your non-negotiables from your nice-to-haves. From there, they’ll focus on what’s really most important to you as they come up with a bigger list of options for you to choose from.

2. Coaching You To See the Potential: As you tour these added options, your agent will help you look beyond cosmetic flaws and imagine what the home could be with a little work. Simple updates like a fresh coat of paint or new flooring can make a big difference.

3. Connecting You with Local Pros: And an agent’s support goes one step further. If they know what you’re hoping to change after you move in, they can connect you with local pros who can get the job done. That way it’s less work for you, and you don’t have to worry about tracking down contractors.

Bottom Line

Remember, there is no perfect home. But with expert help and an open mind, an agent can find you the right home – even in today’s market. Connect with a local real estate agent to see what’s out there.

Read more at KeepingCurrentMatters.com

Related Links

• Ideas for Freshening Up Your Home’s Exterior

• Inflation Drops Again in June, Clearing the Path to a Fed Rate Cut This Fall—and Relief for Homebuyers

• Patterned Flooring is Back: A Look At This Hot Design Trend

If there is a home that you would like more information about, if you are considering selling a property, or if you have questions about the housing market in your neighborhood, please reach out. We’re here to help.

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Inflation Drops Again in June, Clearing the Path to a Fed Rate Cut This Fall—and Relief for Homebuyers

Annual inflation in the U.S. dropped to its lowest level in more than three years last month, increasing the odds of a September interest rate cut that would bring relief to mortgage markets.

In the 12 months through June, the consumer price index rose 3%, according to data released by the Department of Labor on Thursday. It was the lowest annual increase in prices since March 2021.

On a monthly basis, overall prices dropped 0.1% in June from May, the first monthly decline since the onset of the COVID-19 pandemic in spring 2020. Costs for energy and vehicles dropped on both a monthly and annual basis, offsetting rising housing prices.

Prices for shelter, which make up more than a third of the index, continued to rise last month under the Labor Department’s method of calculating housing costs. Rent rose 5.2% from a year ago, while owner’s equivalent rent, a measure of what homeowners would pay to rent their own residence, was up 5.4%.

For potential homebuyers, the overall cooling of inflation toward the Federal Reserve’s 2% target could mean incoming relief from higher mortgage rates. The central bank is now viewed as extremely likely to slash a quarter point from its current benchmark rate of 5.3% when policymakers meet in September.

“Prospective homebuyers have been eagerly waiting for a drop in borrowing costs,” says Bright MLS Chief Economist Lisa Sturtevant. “Mortgage rates will fall when the Fed cuts interest rates … but it is also possible to see mortgage rates come down even before the actual Fed rate cut, if the central bank assertively telegraphs their intentions.”

Mortgage rates generally follow yields on the 10-year Treasury note, which move in response to investor expectations about inflation, the economy, and future Fed rate moves. Yields on the 10-year dropped on Thursday morning after the new inflation data.

Average rates on 30-year fixed mortgages stood at 6.95% for the week ending July 3, more than double their level three years ago, according to Freddie Mac.

Fed chair signals rate cuts on the horizon

Earlier this week, Fed Chair Jerome Powell testified on Capitol Hill as part of his twice-yearly report to Congress on the state of the economy.

In his remarks, Powell highlighted softening in the U.S. labor market, after the unemployment rate ticked up for the third straight month, hitting 4.1% in June.

The labor market "has cooled really significantly across so many measures," Powell told the Senate Banking Committee on Tuesday. "We are well aware that we now face two-sided risks."

His comments highlighted the Fed's dual mandate to keep both inflation and unemployment low, and signaled that policymakers could soon cut rates to prevent rising layoffs and a recession.

"Today’s inflation reading underscored Fed Chair Powell’s recent remarks that both the risks to the economy and the supply and demand of goods and services are coming into better balance," says Realtor.com Chief Economist Danielle Hale.

"Combined with the more moderate June jobs report, this data should build Fed confidence that its target is in sight, and could pave the way for a signal in the July Fed statement that a rate cut is on the horizon," continues Hale. "This should help improve interest rates, like mortgage rates, much sooner, especially if the data continue on this trend."

In his testimony, Powell struck a cautious tone, saying that officials don't expect to cut rates until they are certain that inflation is "moving sustainably" toward the Fed's 2% goal. Still, this was a dovish shift in language from his previous statements, noted Sturtevant.

"There is a notable distinction between 'moving sustainably toward 2%' and 'hitting 2%,' and by using this language, Chairman Powell has escalated expectations that the central bank is almost ready to cut the Federal funds rate," she says.

Bond markets still view a rate cut at the Fed's next meeting in late July as unlikely. But investors now price in a 79% probability of a quarter-point rate cut at the central bank's September meeting, according to the CME FedWatch tool.

Read more at Realtor.com

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If there is a home that you would like more information about, if you are considering selling a property, or if you have questions about the housing market in your neighborhood, please reach out. We’re here to help.

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