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There's a whole lot going on in the real estate world, so let's get right into it with the June 2024 market update. The big question in June of 2024 still seems to be: buy now or wait?
Affordability Crisis
Everyone knows that home prices have been skyrocketing in the last few years. The Federal Reserve has stepped in to try to tame the inflation we've been seeing, and these two factors have combined to cause the sky-high interest rates we're dealing with now. These interest rates are the main reason that a lot of buyers are deciding to wait. According to the National Association of Realtors and Jessica Lance, the NAR Deputy Chief Economist and Vice President of Research, "Home buyers are currently facing the most challenging affordability conditions in nearly 40 years."
Key Factors
The main reasons for this affordability crisis are:
Stagnant Wages
High Home Prices
Soaring Mortgage Rates
All these factors are raising concerns about whether home prices are going to decline anytime soon. "I certainly know that everyone I talk to seems to ask: Are interest rates going to go down or are home prices going to go down?" says Lance.
Home Price Trends
Despite the high mortgage rates, the National Association of Realtors says that more than 90% of the country's metro areas are experiencing home price growth. This growth is happening despite facing the highest mortgage rates in two decades. Rising prices are the direct result of insufficient housing supply not meeting the demand. The lack of homes has kept upward pressure on the prices, and many forecasters, including NAR, say this is going to continue.
Price Increase Estimates
So, if home prices are increasing this year, by how much can we expect them to increase? Of the forecasters that I follow, there's a pretty wide range of estimates anywhere from a 0.5% increase to 4.8%. "In a normal and healthy real estate market, the historical increase in appreciation that you could expect would be anywhere from 3% to 5%," notes one expert. This suggests that things might be becoming a little more normal and a little healthier in the real estate world.
Interest Rates Outlook
Unfortunately, significant relief on those rates is unlikely. "I think it's very unlikely that we're going to be reaching the fives," say many of the forecasters I follow. "Maybe 6.5% if we're lucky by the end of the year," they add. Economist Lawrence Yun says, "In the current market, rising prices are the direct result of insufficient housing supply not meeting the full demand." It's estimated right now that between one million and one and a half million homes are under-supplied in this country, which is really keeping that upward pressure on prices.
Inventory Insights
If you are a buyer in this market, what do you need to know about the inventory? Bill McBride of the Calculated Risk blog says, "I always like to start with inventory because inventory usually tells the tale." As a country, our real estate market is still in the healing process of the pandemic. Take a look at this graph from Realtor.com, which shows we're still well below those pre-pandemic levels of housing inventory, but it is increasing and getting close to where we were before COVID.
Regional Differences
I work in New Hampshire, Maine, and Massachusetts, and all three of those states have been very similar when it comes to inventory changes. If you live in Nevada or South Dakota, though, please let me know what's going on over there because I would be very curious to find out why it's so different in those two states.
New Listings and the Lock-In Effect
Why are new listings up year-over-year? Lance Lambert of Realtor.com says, "The lock-in effect is easing a bit as the initial mortgage rate shock recedes in the rearview mirror and as some sellers come to terms with the fact that their life circumstances have changed and the sub-4% mortgage rates are not returning anytime soon." What this means is that a lot of home sellers who were holding off on making a change because they were hoping interest rates would go back down have realized that's unlikely to happen soon. Now they're listing their homes as they prepare to go back into the market and deal with the current interest rates.
Contribution of New Construction
Another interesting point is that one in three homes on the market right now are new constructions, a figure that's usually around 33% of the homes in the market. This increase in new construction homes helps to alleviate some of the supply shortages and provide more options for buyers.
Conclusion
In conclusion, the June 2024 real estate market remains complex, with high home prices and mortgage rates posing significant challenges. However, increasing inventory levels and new constructions offer some hope for buyers. While the affordability crisis is unlikely to ease significantly in the near future, understanding these market dynamics can help you make informed decisions about whether to buy now or wait. As always, staying informed and consulting with a real estate professional can provide valuable guidance on your real estate journey.
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My name is Hunter Letendre, and I am a licensed realtor in New Hampshire, Maine, and Massachusetts with Berkshire Hathaway Home Services Verani Realty. Please let me know what topics you think I should cover next month or any other videos that would be helpful to you on your real estate journey. Thanks for watching, and have a good one!
Watch the full video below for more details and additional charts.
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