Real Estate Market Update: August 2024

The housing market has cooled down, but recent mortgage rate drops could reignite buyer interest as we head into fall!

And the best news? 

Federal Reserve Chair Jerome Powell has strongly hinted that it will lower the benchmark interest rate by 25 basis points in September. Housing economists also predict that mortgage rates will continue to fall into the 5% range by the beginning of 2025. If this happens, we could see revived housing market competition.

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

August Housing Market Trends

New and existing home sales have finally improved, but there’s still room for improvement.

"Despite the modest gain, home sales are still sluggish," said Lawrence Yun, chief economist at the National Association of Realtors (NAR), in a recent market update report. "But consumers are definitely seeing more choices, and affordability is improving due to lower interest rates."

Existing Homes

After four long months of sales declines, the tide is turning!

Existing-home sales improved in July, increasing 1.3% from June, according to NAR. However, year-over-year sales fell 2.5%. Home sales are still slow, but the market is still recovering. We should see momentum once mortgage rates drop enough to ease affordability constraints.

From July 2023 to July 2024, existing-home prices increased 4.2% to $422,600, per NAR data. This is the 13th consecutive month of year-over-year price gains. Home prices are high, but it’s the lowest amount of annual appreciation we’ve seen since November 2023, according to the S&P CoreLogic Case-Shiller national home price index.

New Construction Homes

The sale of new construction homes also rose year-over-year by 5.6% and by 10.6% in July, according to the National Association of Home Builders (NAHB). The median new home price was $429,800, up 3.1% over the last month and a 1.4% decrease year-over-year.

During the second quarter of 2024, new home prices were actually cheaper than existing homes. Thanks to limited resale inventory and home builder incentives, a family needed to spend less of their income to buy a typical newly built construction home than a typical existing home, the NAHB reported.

However, affordability challenges continue to sideline prospective buyers, but that could change once the Federal Reserve starts cutting rates. The NAHB anticipates “gradual improvements” for the home building sector as mortgage rates come down.

Housing Inventory

Total existing-home inventory was up 0.8% in June and an astounding 19.8% from one year ago, the NAR reported. Unsold inventory currently sits at a 4.0-month supply at the current sales pace. 

In the new construction industry, the NAHB reported that single-family new home inventory in July dropped 1.1% from the previous month. This represents a 7.5-month supply. New and existing inventory is near 4.5 months, which is still low.

Mortgage Rates

Mortgage rates have come way down since my last market update.

According to Freddie Mac’s Primary Mortgage Market Survey, the average interest rate on a 30-year fixed-rate mortgage was 6.35% as of August 29, 2024. The Federal Reserve signaled rate cuts coming in September, and the market anticipates that mortgage rates will continue their decline.

Freddie Mac noted that we could see a rebound in purchase activity once we see rates continue their downward trend.

DC Housing Market Update

The D.C. housing market also saw an increase in home sales activity.

According to the Northern Virginia Association of Realtors (NVAR) July 2024 market statistics data, home sales grew by 13.5% over the last year. Inventory also saw a 30% increase over the same period. NVAR noted that this gives buyers more options to choose from, but the desire for houses continues to drive prices higher.

The median sold price in July was $735,000—a 6.4% increase from a year ago but down from June’s $780,000. The housing supply sits at a 1.3-month supply, which is higher than the five-year average of a 1.2-month supply.

Home sales increased significantly in Falls Church (50%) and Fairfax County (17.2%), including Great Falls and McLean. The NVAR said this is a good sign that our post-pandemic housing market is going back to normal.

The Total Value of Millennial-Owned Homes Up Over 21%

According to Redfin, the total value of homes owned by millennials rose 21.5% over the past year to $8.6 trillion in the first quarter of 2024. This is nearly four times as fast as any other generation.

Redfin said this is partially due to the overall growth in home prices but also because millennials are the largest generation by population and have hit an age and financial position where they make up a bigger chunk of the home buying market.

Because millennials represent the largest share of buyers, this could eventually lead to a housing market boom.

Housing Market Competition Could Revive This Fall

Sellers have lost the upper hand as the housing market continues to cool slowly, but this may not last for long.

Zillow’s market heat index shows that the market officially moved to “neutral,” which is a more balanced market. This is the first time this year that it’s been anything but a seller’s market. Competition has eased, but a recent drop in mortgage rates and talks of future rate cuts could bring in more new buyers than sellers, reviving competition, Zillow said.

Since the Fed has indicated they’ll begin cutting rates in September, Wells Fargo has revised its forecast for the 30-year fixed-rate mortgage. Here’s the revised forecast:

• Q4 2024: 6.25%
• Q1 2025: 6.10%
• Q2 2025: 5.90%
• Q3 2025: 5.85%
• Q4 2025: 5.80%

Rates this low could reignite buyer interest as we head into fall and maybe even next spring if rates dip below 6%.

The Upcoming Presidential Election and Its Impact on the Housing Market

In the months leading up to the presidential election, conventional wisdom tells us to wait until after the “election slowdown” to buy a house. But is this necessarily true? Experts say no.

People tend to bunker down in the face of uncertainty, but housing economists told The Real Deal that they found no empirical evidence of a relationship between the housing market and election years.

“The effect is more on sentiment and psychology than any real activity in the housing market,” Realtor.com senior economist Ralph McLaughlin said, TRD reported.

However, some markets do react, including Washington, D.C.

According to Redfin chief economist Daryl Fairweather, the DMV consistently sees a slowdown in market activity leading up to federal elections. Although home sales may be temporarily delayed, the market always comes back to life afterward.

And if you’re waiting for prices to come down after the election, don’t hold your breath.

According to NAR data, existing-home prices actually went up after seven of the last eight presidential elections. Between 1992 and 2020, the only time prices went down was in 2008 during the housing crisis. But that wasn’t a typical year, and today’s market is much more robust.

Final Thoughts

It may seem like we’ve been in a transitional phase for months, but there are signs that activity could pick up if the Federal Reserve follows through with rate cuts. 

Mortgage rates have already begun to trend downward, and this should hopefully continue into next year, as experts predict. Home prices continue to rise steadily, but lower mortgage rates will definitely ease affordability challenges.

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.