May 2024 Real Estate Market Update

The typical spring homebuying season isn’t heating up as it used to. 

Though mortgage application volume is higher than last fall, it’s still 10% lower than last year. However, there are still encouraging signs ahead. As temperatures continue to rise, experts anticipate growth in housing inventory and home listings. 

Additionally, there have been more homes listed than sold, and experts at Fannie Mae predict a gradual increase in inventory this year and slowing home price growth.

Want the latest real estate news? Here’s the housing market update for May 2024!

May Housing Market Trends

Mortgage rates came down slightly, but shot back up over 7% at the end of May. However, there have been big improvements in both new and existing housing inventory. Here’s the latest update.

Existing Homes

Existing home sales fell 1.9% in April, while the median existing-home sales price increased 5.7% from April 2023 to $407,600, according to the National Association of Realtors (NAR). This marks the tenth consecutive month of year-over-year price gains and the highest home price ever recorded for the month of April. 

The price rises are great news for homeowners. However, NAR Chief Economist Lawrence Yun said the pace of price increases could taper off since more housing inventory is becoming available.

New Construction Homes

Sales of newly built, single-family homes fell 4.7% in April thanks to higher mortgage rates, according to the National Association of Home Builders (NAHB). The pace of new home sales is down 7.7% from a year earlier, and the median new home sale price in April was $433,500. This is down 1.4% from March but up 3.9% compared to April 2023.

Housing Inventory

Housing supply is on the rise! 

The inventory of unsold existing homes rose 9% from the previous month to 3.5 months’ supply at the current monthly sales pace, per NAR data. In a balanced housing market, there’s typically a 6-month supply of inventory.

According to the NAHB, new home inventory was also up 12.1% compared to a year ago. At the current building pace, this represents a 9.1-month supply. Completed, ready-to-occupy inventory is up 42.6% year-over-year. 

A recent Redfin report also revealed that one-third of houses for sale in the U.S. during the first quarter of 2024 were newly built. The portion of housing supply that’s newly built is about double pre-pandemic levels.

Mortgage Rates

Interest rates for the 30-year fixed-rate mortgage fell below 7% for the first time in over a month, according to Freddie Mac’s Primary Mortgage Market Survey. However, rates increased to 7.03% as of May 30 thanks to hawkish commentary about inflation. Markets are dialing back their expectations of interest rate cuts.

DC Housing Market Update

The D.C., Maryland, and Northern Virginia housing markets have been rough, but things are starting to look up across the board!

According to the Northern Virginia Association of Realtors (NVAR) April 2024 market statistics data, the median home price in the NVAR region was $751,000, up 8.8% from the previous year. 

Housing inventory increased by 24.9% year-over-year to a 1.1-month supply. Active listings jumped 9.7% from last year, and the number of new listings also increased by approximately 16.9% between April 2023 and April 2024. The percentage of homes sold during the same time period was up 13.5%. The last time the NVAR region saw a double-digit growth in sales year-over-year was in November 2021.

Homes are also selling at a faster pace. The average days on market was 14 days, down 22.2% from the year before. Total sales volume saw a sizeable gain, increasing by 22.6% to $1.39 billion.

This is great news for the DMV as we head toward a healthier balance between home selling and buying. Activity is picking up, and homebuyers are feeling a little more inspired. Despite the higher mortgage rates, people are still choosing to buy and sell.

New Construction Home Market

Although the supply of new homes has grown, the market is still tight. 

Builder confidence was down in May, and there are also concerns about recent code rules that require the U.S. Department of Housing and Urban Development (HUD) and the U.S. Department of Agriculture (USDA) to insure mortgages for new single-family homes only if they are built to the 2021 International Energy Conservation Code. 

This recent decision will increase the cost of construction, but the NAHB reported that 25% of builders cut home prices in May to boost sales. The use of sales incentives also increased to 59% from 57% in April.

The NAHB also expects mortgage rates to fall below 7% in the weeks and months ahead, which should help new home sales recover. Lower mortgage rates, along with decreases in new home prices and builder incentives, should encourage buyers to turn to new construction in the coming months.

When Will Mortgage Rates Go Down?

At the latest Federal Open Market Committee (FOMC) meeting, the Federal Reserve kept the federal funds rate unchanged at 5.25%-5.50% for the sixth consecutive meeting.

What exactly does this mean for the real estate market? It’s still unclear, but analysts now expect mortgage rates to hover at elevated levels between 6.5% and low-7% for the remainder of 2024. According to USA Today, here are the current forecasts:

• Fannie Mae: 6.4% by year-end, up from predictions of 5.9% in February.
• Mortgage Bankers Association (MBA): 6.4% at year-end, up from its 6.1% forecast in January.
• NAR: Average 7.1% this spring and settling at 6.5% at year-end, up from its 6.3% prediction at the start of the year.
• Wells Fargo: 6.5% at year-end, up from its prediction of 6.05% in January.

Are Home Prices Dropping?

Home prices may be dropping in some markets, but it’s definitely not enough to suggest a housing market crash.

However, home price growth is finally back to where it was before the pandemic, according to data from Redfin. Mortgage rates are higher, but Redfin noted that they aren’t as volatile as they were at the height of the pandemic, which has helped stabilize home price growth.

Housing Market Predictions 2024

Mortgage rates continue to hover around 7%, and experts don’t expect much of a rate drop this year. The good news is that housing inventory has improved, and price growth has returned to a somewhat normal pace.

The typical busy spring homebuying season still isn’t what we expected. Inventory has improved, but it’s still tight, and high mortgage rates and home prices are key barriers for many prospective buyers and sellers have less of an incentive to sell, according to Freddie Mac’s May 2024 Economic, Housing and Mortgage Market Outlook report.

If rates begin to trend downward as experts predict, then I expect market activity to heat up in response. 

Looking to buy or sell in the DC area? Don’t navigate the complexities of the current housing market alone! Reach out today for expert real estate leadership.