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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 we will take a deep dive into mortgage rates, inflation, and unemployment with a quick peek at the current housing inventory trends, and the importance of setting the right home price in today’s market.

Mortgage Rates

The big news this month focuses on interest rates. The Fed just announced a half-point rate cut, and this is a welcome shift from the last two years as mortgage rates have continued to rise. 

While we're not completely in the clear yet, things are starting to look better. Lower rates would help make homes more affordable again.

Experts projections are calling for the 30-year fixed mortgage rate to decrease over the next 6 to 12 months. While it's difficult to predict the exact timing or amount, the general expectation is that rates will come down, which brings optimism about the future.

According to a survey by Bright MLS conducted last year, 70% of potential buyers halted their home search. As mortgage rates drop, buyers are re-entering the market.

While a major shift isn’t anticipated, this change will give the real estate market a small boost. There is an opportunity in the market right now.

Inflation & Unemployment

Inflation is slowly moving towards the Federal Reserve's target of 2%, and the unemployment rate is beginning to rise, however, it is important to note that it is still below the average for the past 50 years. 

The Fed is cautious about avoiding a further decline in the job market. With inflation decreasing and unemployment increasing, these are some of the factors causing the Fed to indicate that it's time to change its policies.

Inventory 

The housing market is starting to shift towards a more balanced market. Generally, a balanced market is defined as having a supply of homes for sale that lasts five to seven months. This means, that considering the current buyer demand and available inventory, there are enough homes on the market to last five to seven months.

Mortgage rates will play a significant role in shaping this transition from the recent seller’s market we have seen. As mortgage rates decrease, more buyers might enter the market. However, there are many other economic factors that influence the real estate market, so for now, it’s expected that the market will fluctuate between balanced and slightly favoring sellers, but it likely won’t shift dramatically into a buyer’s market.

Overall, homes are staying on the market longer. Just a week ago the median days on the market was 30-40 days - meaning it takes 30-40 days of a home being listed for sale before it goes under contract and/or sells. Now, we are looking at over 50 days on the market, according to Realtor.com. This is one of the factors behind the increase in inventory levels. 

Sellers are also receiving fewer offers - dropping from an average of 3 offers from buyers on a home for sale to 2.7.

Pricing Your Home 

Rising inventory levels, coupled with the market beginning to balance, means pricing a home appropriately becomes crucial. Nationwide, we are seeing an increasing number of price reductions. Homes that are priced correctly tend to sell quickly. 

The trend of price reductions is increasing across the country.

In addition, price appreciation for homes has been slowing down recently. In 2022, we saw home prices rising at a high rate, but in 2023, the increase became more moderate and around the historical average of 3-5% annually. Homes priced correctly in today’s market are selling fast, while those set too high are discouraging potential buyers.

When setting a home price, it’s crucial to understand why pricing it right matters. If a home is priced too low, it can lose value and reduce buying power, while an overpriced home may stay on the market longer.

It’s important to set a price that reflects market value. If a home is priced too high, it will likely eventually need a price reduction to attract buyers. A high price may give off the impression that the seller is not motivated to sell. Sellers might think, "We can just drop the price later." Well... yes, but sometimes the impact of this is not seen as well as pricing to the market straight out of the gate. Price reductions can be overlooked - flyers and emails announcing the adjustment can fall into a pile of other real estate marketing mail.

An initial high list price may also make buyers wonder if the price was reduced because something was found wrong with the home, it may suggest an unrealistic seller with whom there may be some difficulty getting a deal closed, and it may keep the home on the market so long people wonder why it hasn't sold. 

Bottom Line

We are now seeing a mortgage rate at its lowest level in 18 months, inflation is moderating, and the recent trends of more housing inventory and increasing price reductions are signs the market may be becoming more balanced. While we are still in a seller’s market, that is a great opportunity to take advantage of. While mortgage rates are comparatively low for now, with uncertainty on the horizon, it is also a great time for buyers.

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