May 1, 2024
Mortgage rate, home sales and prices are all on the rise; the U.S. economy added over 300,000 jobs in March, exceeding expectations; and housing starts have fallen due to interest rate and financing concerns. All this and more in this month’s Real Estate Update.
Mortgage rates, home sales and prices are all on the rise
Mortgage rates are up, with the average 30-year fixed mortgage rate reaching 7.17% by the end of April 2024. Despite this increase, experts anticipate rates to gradually recede throughout the year. The National Association of Realtors (NAR) predicts that rates will end the year at 6.5%, while Fannie Mae expects them to be around 6.4%. However, these rates are still higher than the initial forecast of 6.1% made earlier in the year.
The pressure from elevated mortgage rates may impact homebuying activity, but it hasn’t yet reflected in official data. Pending home sales increased by 3.4% in March, according to NAR. Although conditions for buying a home may be slightly tougher due to higher rates, the median existing-home sale price is expected to rise by 1.8% to $396,800. Despite the challenges, home sales are projected to increase in 2024, reaching an estimated 4.46 million existing-home sales.
Lawrence Yun, NAR’s chief economist, believes that sales will continue to rise due to increasing population, increased inventory from home construction and life-change events.
The U.S. economy added 303,000 jobs in March, exceeding expectations
In March 2024, the U.S. economy saw a significant boost with the addition of 303,000 jobs, surpassing the average monthly gain from the previous year and outperforming economists’ expectations. The unemployment rate remained stable at 3.8%, marginally lower than February’s 3.9% and still under the full employment threshold of 4%. Despite the strong job market, the Federal Reserve is unlikely to cut interest rates before July, suggesting that mortgage rates will remain high for an extended period.
The job growth was particularly strong in the health care, government, and construction sectors, with notable increases of 72,000, 71,000, and 39,000 jobs respectively. Average hourly earnings rose by 0.3% to $34.69, and were 4.1% higher than the previous year, exceeding the latest inflation rate of 3.2%. The housing market remains robust, but the high mortgage rates, which have been above 6.5% for nearly a year, are causing some potential homebuyers to delay their purchases in anticipation of rate cuts later in the year.
Housing starts fall on interest rate, financing concerns
In March, housing starts in the U.S. fell by 14.7% to a seasonally adjusted annual rate of 1.32 million units, according to the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. This decrease was due to higher than expected interest rates and the latest inflation readings showing no improvement. Builders also faced higher supply-side costs and tighter lending conditions. The March reading of 1.32 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Within this overall number, single-family starts decreased 12.4% to a 1.02 million seasonally adjusted annual rate, but are up 21.2% compared to a year ago.
The multifamily sector, which includes apartment buildings and condos, decreased 21.7% to an annualized 299,000 pace for 2+ unit construction in March. On a year-over-year basis, multifamily construction is down 44.3%. Meanwhile, there are now 689,000 single-family homes and 957,000 apartment units under construction, which are 2.7% and 1.5% lower than a year ago, respectively. Total housing units now under construction are 2.0% lower than a year ago.
While apartment construction starts are down, the number of completed units entering the market is rising due to prior elevated construction levels. The pace of completions for apartments in buildings with five or more units is up 27.4% for the first quarter of 2024 compared to the first quarter of 2023. This will place some downward pressure on rent growth.
Full story at NAHB Eye on Housing
Disclaimer: this is a compilation of industry news from trade media and industry groups, it does not share any forward-looking predictions or projections.
