Experts are torn about where exactly the housing market is headed in the latter half of the year.
“Mostly, we think the housing market is going to improve over the next half of the year,” Glenn Kelman, chief executive of Redfin, a real estate brokerage site, said on a May 22 appearance on CNBC’s “Money Movers.”
“We’ve hit rock bottom in the first quarter of 2024 and I would expect the housing market to do a little bit better,” Kelman said.
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Other experts are less sure about the market’s prospects for improvement.
“It’s a very strange market, and it’s kind of hard to predict,” said Jeff Ostrowski, a housing analyst at Bankrate.com.
Here are some of what Ostrowski, Kelman and other real estate experts say could shape the real estate market in the second half of 2024:
More homes are coming on the market
The mortgage rate lock-in effect seems to be wearing off, said Orphe Divounguy, senior economist at Zillow.
The mortgage rate lock-in effect, or the golden handcuff effect, kept any homeowners with extremely low mortgage rates from listing their homes last year as they didn’t want to finance a new home at a much higher interest rate.
During the week ending June 1, newly listed homes grew 2.1% from a year ago, according to a weekly housing trends report by Realtor.com. In the same period, available inventory of homes for sale grew 35.5% compared with last year, Realtor.com found.
In his CNBC appearance, Kelman also pointed out that demand for homeownership remains high, especially among buyers who have been putting off the home purchase for a long time.
While the market is seeing more listings, the boost in supply is not enough to attract buyers, according to Doug Duncan, senior vice president and chief economist at Fannie Mae.
“Listings have trended generally upward of late, suggesting to us that a rising number of current homeowners can no longer put off moving,” said Duncan in a release earlier this month. “However, we believe the ongoing affordability challenges are likely to weigh on how quickly these new listings convert to actual sales.”
‘Some movement’ on interest rates
The 30-year fixed rate mortgage slid 6.99% on June 6 after climbing 7.22% on May 20, according to Freddie Mac data via the Federal Reserve.
“Mortgage rates are down a bit from May highs, but that hasn’t spurred a surge of competition among buyers in the housing market,” Divounguy said.
Affordability remains a top priority for buyers and rates stayed above 7% for long.
Many experts believe the Federal Reserve will likely hold interest rates in the upcoming board meeting on June 12. However, the National Association of Realtors forecast a potential interest rate cut by the fall of this year, according to Jessica Lautz, the NAR’s deputy chief economist.
By late September, “perhaps we will start seeing movement on the Fed funds rate,” she said. “That’s at least what our hope is.”
While mortgage rates are forecasted to come down to 6.5% in the fourth quarter, homebuyers may not see much relief given rising home prices amid limited housing inventory, noted Lautz.
“It’s very possible that they’re ending up paying the same mortgage payment because they’re purchasing a home that while has a lower interest rate, has a higher price point,” she said.
‘It’s hard to foresee prices really cooling’
While the housing market has slowed in terms of the number of transactions, prices haven’t soften despite broader expectations, Ostrowski explained.
The median home sale price across the U.S. increased to $392,200, a 4.4% jump from a year earlier, according to Redfin.
“It’s hard to foresee prices really cooling or declining nationally,” said Ostrowski. “It seems likely we’re going to see another record high for home prices this summer.”
Some metropolitan areas in the U.S. have seen prices soften. Home-sale prices declined 2.9% in Austin and 1.2% in San Antonio and Fort Worth, Texas, according to Redfin data. Home prices cooled 0.9% in Portland, Oregon, the firm noted.
However, many of these areas saw major price growth during the Covid-19 pandemic, with prices jumping as much as 45%, said Lautz. Buyers might not see much relief in affordability despite recent price declines given those pandemic-era runups.
About 90% of metro markets posted home price gains in 2024, according to NAR data. While price points may be softening in some local markets, the “vast majority of markets are seeing home price growth,” said Lautz.