Is the housing market bouncing back in 2024—or just bouncing back and forth? There have been some signs of housing inventory recovering, with the number of homes actively for sale growing by 7.9% year over year in January, according to a recent Realtor.com® report. That’s “notably higher compared to last year,” according to Realtor.com Chief Economist Danielle Hale.
Mortgage rates have also subsided from their 23-year high of 7.79% in October to 6.69% in the week ending Jan. 26 for a 30-year fixed-rate loan, according to Freddie Mac.
But despite this double dose of promising news, Hale doesn’t expect that America’s housing affordability crisis will improve all that quickly. Rather, she predicts it will take a few baby steps forward, and maybe one or two back.
“While gradually falling mortgage rates are helping slow the cost to purchase a home, the housing market will likely bounce back and forth between improvement and status quo over the next several months,” she explains.
It’s also worth noting that housing inventory may be up annually, including an uptick over the past year, but it is still down compared with typical pre-pandemic levels from 2017 to 2019 by a whopping 39.7%.
The housing market’s holding pattern
The housing market’s outlook remains murky in part because the Federal Reserve’s battle against inflation is not yet over. It raised interest rates to bring inflation down. While the Fed doesn’t set mortgage rates, mortgage rates generally follow the same trajectory as the Fed’s short-term interest rates.
“Recent economic data showing stubborn prices and a strong labor market create uncertainty over the direction of Federal Reserve decisions, and mortgage rates in the near term,” explains Hale. “In order to see mortgage rates drop more significantly, we need to see more evidence that inflation is slowing and that the economy is on a sustainable path. Mortgage rates have been in a rough holding pattern because the data have been relatively mixed recently.”
The latest trends in home prices
Meanwhile, home prices have remained more or less in limbo, too, inching up 1.4% higher this January than a year earlier, to $409,500.
And even though mortgage rates have fallen from their peak in October, median monthly mortgage payments for January have increased compared with this same month last year. Today, a buyer will pay about $108 more to finance 80% of the typical home than they would have a year earlier.
While home prices could decrease in the future, Hale warns that holding off on buying until that moment arrives might not be a wise strategy.
“Waiting for prices to fall is a tough position to be in,” explains Hale. “While these figures are above historic norms, which does open up the possibility that we may see declines to bring them back in line with typical ranges, when exactly that will happen is tough to pinpoint.”
Instead, Hale thinks these home shoppers should “take the current price level as a given, and figure out the best decision given the market that they face. For some, this will mean that it makes more sense to rent. For others, it will mean that buying makes more sense.”
Why housing inventory is rising
Homeowners, once frozen in place by their existing low mortgage rates, are at long last showing signs of life.
In addition to January’s uptick in overall listings, the number of new listings also increased this month by 2.8% over last year’s levels. This marked the second month this has happened after a 17-month streak of decline.
And the pace for home sales is picking up, too: Homes spent 69 days on the market in January. That’s four days faster than this same month last year, and a whopping two weeks faster than before the COVID-19 pandemic. More homes to choose from might bring welcome relief to buyers. Home shoppers looking for warmer climes during these frigid months are especially in luck, with inventory up 11.5% in the West and 1.9% in the South.
“The South has provided more opportunity for buyers in the form of better listing trends,” explains Hale. Metros that saw the most inventory growth included Memphis, TN, up 28.8%; New Orleans, up 28.5%; and Orlando, FL, up 27.3%.
While those metros still had a lower level of inventory when compared with pre-pandemic years, San Antonio, TX, up 24.7%; Austin, TX, up 8.2%; and Dallas, up 2.3%, “saw higher levels of inventory in January compared to typical 2017 to 2019 levels,” says Hale.
New listings fell by 4.0% in the Northeast and 1.9% in the Midwest.