Real Estate Market Update

We’re heading into the summer homebuying season, but activity is weak. Many homebuyers are simply being priced out of the housing market and are eagerly waiting for mortgage rates to come down.

Unaffordability is one of the biggest challenges in this market, especially in the D.C. metro area. Mortgage rates have eased slightly, but until the Federal Reserve cuts the benchmark rate, rates will stay higher for longer than initially anticipated. 

But once rates start to come down, activity should pick up! Timing is of the essence in this market.

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

June Housing Market Trends

Home sales, both existing and new construction, are down thanks to stubbornly high interest rates and the mortgage rate lock-in effect. The biggest positive I’ve seen this month is a growing housing supply, which could help moderate home price gains.

Existing Homes

Existing home sales are down 2.8% from a year ago, but prices are at their eleventh consecutive month of year-over-year price gains. In May, the median existing-home sales price was $419,300, according to the National Association of Realtors (NAR). This is up 5.8% since May 2023 and the highest price ever recorded.

"Home prices reaching new highs are creating a wider divide between those owning properties and those who wish to be first-time buyers," said NAR Chief Economist Lawrence Yun. However, he noted that the growing housing supply will help boost home sales and tame home price gains in the coming months.

New Construction Homes

Housing starts retreated 5.5% in May thanks to high mortgage rates, according to the National Association of Home Builders (NAHB). Sales of newly built, single-family homes also fell by approximately 11.3%, and the pace of new home sales in May was down 16.5% from a year earlier. This is the lowest pace since November 2023. Smaller new home sizes and builder incentives have pushed the median new home price to $417,400, a 1% decrease from last year.

Carl Harris, chairman of the NAHB, says high mortgage rates have kept prospective buyers on the sidelines, but there’s still unmet demand. Harris expects mortgage rates to moderate in the upcoming months, which will help bring buyers back into the market.

Housing Inventory

Good news! The U.S. housing supply is still growing!

At the end of May, NAR data shows that total housing inventory was up 6.7% from April and 18.5% from a year ago. Unsold inventory is currently at a 3.7-month supply at the current sales pace, up from 3.5 months in April and 3.1 months in May 2023.

New home inventory is also higher, up 12.9% compared to a year earlier, according to the NAHB. This represents a 9.3-month supply at the current building pace.

Mortgage Rates

Mortgage rates are finally going down again. 

After reaching 7.03% for a 30-year fixed-rate mortgage at the end of May, interest rates are now 6.86% as of June 27th, based on Freddie Mac’s Primary Mortgage Market Survey. This is the lowest level in nearly 3 months and the fourth straight week of rate decreases. Freddie Mac anticipates interest rates to continue to come down during the summer, which should bring more buyers into the market!

DC Housing Market Update

 The DMV is one of the most unaffordable places to live in the world, according to Chapman University’s recent Demographia International Housing Affordability report. The Washington D.C. metro area fell right in the middle of the list, tying for 48th in affordability with Charlotte, North Carolina.

It comes as no surprise when you look at the region’s housing prices. According to the Northern Virginia Association of Realtors (NVAR) May 2024 market statistics data, the median home price in the NVAR region was $760,000, up 6.3% from last year.  However, home sales increased 1.2%, and the current 1.3 months of housing supply represents a 35% year-over-year increase.

The good news is that the local market is heading toward pre-pandemic times and more homeowners are willing to sell, according to the NVAR. Also, the area’s median income does help make up for these high prices. 

Virginia ranked first in WalletHub’s States Where People Have the Highest Income 2024 study. The study looked at the average annual income of the top 5%, the average for the bottom 20%, and the median for all of each state’s residents. According to the study, both the rich and the poor are doing better than their counterparts in other states. D.C. ranked 15th on the list.

Weakening Builder Confidence in New Construction Home Market

Home builder confidence in the market for newly built single-family homes was down two points in June, according to the NAHB/Wells Fargo Housing Market Index (HMI). This was the lowest rating since December 2023.

Shelter inflation remains high, helping to keep mortgage rates and new construction costs elevated. This has put a damper on builder confidence. NAHB Chief Economist Robert Dietz says the best way to bring down shelter inflation is to increase the nation’s housing supply.

Modest Progress in Lowering Inflation

The Federal Reserve expects to cut interest rates just once this year, but this could change thanks to stubborn inflation. The Fed left the benchmark interest rate unchanged at its June meeting, awaiting more evidence that U.S. inflation is cooling.

In a statement, the Fed said there’s been “modest” progress in lowering inflation, but the pace of price increases “remains elevated.” Interest rates may come down slightly, as experts predict, but they’ll remain higher than what they were two years ago.

Typical Home Selling for Less Than List Price

A new report from Redfin shows that during the four weeks ending June 23, the typical U.S. home sold for 0.3% less than its asking price. 

Redfin said this is the first time the typical home sold under list price this time of the year since the start of the pandemic in 2020. Last year, the typical home sold at list price, and 2% above its list price two years ago. Also, only 32.3% of homes sold over asking price during this period, the lowest share during spring since 2020.

According to Redfin, most inventory is going stale. More than three in five (61.9%) homes that were on the market in May have been listed for at least 30 days without going under contract. This is because there’s more supply than demand for certain types of homes in certain areas of the country. 

Housing Market Predictions 2024

Although the nation’s housing supply has improved noticeably, it remains below the level necessary for a balanced housing market, which is affecting housing affordability. 

Buyers are getting frustrated, but there’s still a chance that they could get some relief this summer. 

The Federal Reserve still expects to cut rates once this year, and experts say we could see interest rates lower to the mid-six percent range by the end of the year. Even half a percent decrease can save homeowners thousands of dollars per year.

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.