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Full Report

June 2024 Real Estate Market Update   Written By: Ivan Marquez Executive Assistant, Hum Real Estate

Full Report

This month's report provides an in-depth analysis of the key factors shaping the current real estate market, including mortgage rates, the unemployment rate, home prices, housing inventory, equity, capital gains, and affordability. 

Mortgage Rates

Mortgage rates are extremely volatile right now, but the industry has seen a 1% decrease since April. This improves affordability, potentially enabling more buyers who were previously unable to purchase a home to enter the market.

The federal funds rate tends to set the minimum for other interest rates. In light of the Federal Reserve’s decision to maintain the federal funds rate at 5.25% to 5.50%, we could see additional mortgage rate cuts as early as September. This, in conjunction with the moderation in home price growth, is a positive sign for buyers. 

In addition, inventory levels are rising which provides home buyers with more options — a welcome change after the past few years. While it's not expected to lead to an immediate surge in demand, it is great news for buyers. 

Greg McBride, Chief Financial Analyst at Bankrate, emphasizes that lower rates do not mean we are going back to a mortgage rate of 3%, but we might see it drop to 5.5% or 6% over the next year, depending on economic conditions.

Unemployment Rates

One of the factors that influenced the Federal Reserve’s decision is unemployment rates. 

Unemployment rates spiked during the pandemic, stabilized below 4%, and are now beginning to inch up slightly. 

Home Prices
  

Right now, home price trends vary greatly by region and by price point. Nationally, we can see median home prices fell from June to July, but rose in Tallahassee. The opposite is true for price reductions. Nationally, the number of homes with price reductions increased, while Tallahassee saw a decrease. This is a sign of a strong market locally.

Plus, as mortgage rates decrease, there will likely be continued upward pressure on home prices. Current expert forecasts suggest a national home price appreciation of around 3.1% for 2024.

Looking ahead to 2025, the trend is expected to continue with moderate growth of about 2.7%. Keep in mind this is hyper-local, so while some markets may experience mild price declines, others could still see elevated appreciation. 

Nationally, home prices are expected to continue appreciating, but each market and price point will have unique results. Experts generally agree that a broad decline in home prices is unlikely.

Inventory

Pent-up demand could enter the market as mortgage rates drop and inventory rises. 

This trend may lead to more home sales, as buyers are likely to have more options than they've had in recent years.

Equity & Capital Gains

Rising home prices have significantly increased homeowner equity across the country, which is a major strength of the current real estate market. As of now, the national total real estate value is over $45 trillion, with $32 trillion of that being equity and only about $13 trillion in mortgage liability. This is a strong equity position, and is far healthier than what we saw between 2008-2010. 

The downside is that the rapid increase in home prices has led to a rise in capital gains taxes. In 2023, 7.9% of U.S. home sales exceeded the $500,000 capital gains exemption, highlighting the impact of recent price appreciation on homeowners' tax liabilities.

While increased equity is generally positive, sellers should be familiar with the potential tax liabilities if their gains exceed this exemption. 

Just like home prices, the impact of capital gains taxes varies greatly by area - with states like California seeing a large impact, and a moderate impact in the southeast. 

A tax expert can help guide you on your specific situation. 

Bottom Line

The real estate market continues to be influenced by several dynamic factors, and it will be crucial to be up-to-date on the volatility of mortgage rates in light of economic uncertainties like rising unemployment. Overall, home prices and inventory levels show signs of stabilization, but affordability remains challenging. Understanding the impact of these trends is crucial in order to make informed decisions in today’s market when being adaptable will be key as we move forward.

July 2024 Tallahassee Real Estate Market Statistics