Real Estate Update | July 2, 2024
Real Estate Update is a roundup of recent news and data relevant to the real estate business.
Mortgage rates continue to decline, with further decline expected. Inflation slowed for the second straight month, although shelter inflation remains stubbornly high due to rising housing prices. Median sales price hit a record high in May, while existing-home sales declined slightly. All this and more in today’s Real Estate Update.
Mortgage rates decline for 4th straight week
The national average for a 30-year fixed-rate mortgage has slightly decreased to 6.86%, marking a four-week decline and hitting the lowest rate since April, as reported by Freddie Mac. This downtrend in mortgage rates comes amidst a sluggish housing market, where sellers are hesitant to move due to favorable rates, and buyers are deterred by affordability issues. However, the Mortgage Bankers Association (MBA) anticipates a further decline in rates for the rest of the year, which could improve inventory and affordability for homebuyers.
The MBA predicts that the Federal Reserve will cut the federal funds rate twice in 2024, potentially reducing mortgage rates to around 6.5% by year’s end. This forecast is supported by improving inflation data, with consumer prices having risen only 3.3% year over year in May.
Inflation slowed for second straight month, CPI shows
In May, the Consumer Price Index (CPI) showed no change, indicating a halt in inflation, which is significant for American households and policymakers given the inflationary pressures earlier in the year. The core CPI, excluding volatile food and energy prices, saw a modest increase of 0.2%. This marks a continuation of the slowing inflation trend, with the overall CPI not increasing from the previous month and the core CPI rising less than in April. Year-over-year, the CPI rose by 3.3%, a slight decrease from April’s 3.4%, while the core CPI increased by 3.4%, down from 3.6%.
Contributing to the stabilization were lower gasoline prices, which fell by 3.6%, pulling down the energy index by 2%. Food prices saw a minimal increase, with grocery store prices up by 0.1% and dining out costs rising by 0.4%. Shelter costs continued their upward trend, increasing by 0.4% for the fourth month in a row. However, some sectors experienced price declines, including airline fares, new cars and apparel, which helped balance the overall CPI.
Existing-home sales edged lower in May as median sales price reached record high
In May 2024, the U.S. housing market experienced a slight contraction in existing-home sales, decreasing by 0.7% from April to a seasonally adjusted annual rate of 4.11 million, while year-over-year sales saw a 2.8% decline. Despite this dip in sales, the median sales price for homes surged to an unprecedented high of $419,300, up 5.8% from the previous year, with all regions across the country witnessing price increases. This rise in prices has widened the affordability gap, particularly affecting first-time buyers, whose mortgage payments are now more than double compared to pre-2020 home purchases.
On a positive note, the total housing inventory rose to 1.28 million units, an 18.5% increase from the previous year, suggesting an easing of the tight market conditions. The supply of unsold inventory also grew, offering a 3.7-month supply at the current sales pace. These figures, coupled with the median time on the market for properties being 24 days, reflect a market that is still relatively active. The National Association of REALTORS® anticipates that the growing inventory will eventually lead to more home sales and moderate the rapid price escalation, providing a silver lining for prospective buyers navigating the competitive landscape.
Disclaimer: this is a compilation of industry news from trade media and industry groups, it does not share any forward-looking predictions or projections.
