July 2024 Home Sales Expected to Rise in Existing Housing Market

Research Prepare     By

Despite rising mortgage rates, the housing market shows surprising resilience, with existing home sales exceeding forecasts.

The housing market continues to defy expectations. Despite facing headwinds from elevated mortgage rates, July 2024 witnessed a surprising surge in existing home sales, exceeding forecasts and offering a glimmer of hope for a potential turnaround. This positive development, as reported by Zillow’s July 2024 Existing Home Sales analysis, provides valuable insights into the current state of the market.

Let’s delve into the latest data and analyze what it means for both buyers and sellers.

Existing Home Sales Rebound in July 2024

July 2024 marked a positive shift in the housing market, with existing home sales rising by 1.3% to a seasonally adjusted annual rate (SAAR) of 3.95 million units, according to the National Realtors Association. This exceeded expectations, reflecting more market resilience than previously anticipated.

Here’s a closer look at the key takeaways:

  • Sales Exceed Expectations: The 1.3% increase in existing home sales defied predictions of a continued slowdown, signaling sustained demand in the housing market. This unexpected growth suggests that buyers are adapting to the current market conditions, even with higher mortgage rates. For instance, some buyers might choose lower-priced single-family homes or consider alternative financing options to enter the market.
  • Year-over-Year Decline Narrows: While existing home sales are still down 2.5% compared to July 2023, the gap is narrowing, suggesting a potential stabilization in the market. This narrowing gap indicates that the rate of decline is slowing down, which could be a sign that the market is moving towards a more balanced state.
  • Inventory Remains Tight: Despite the uptick in sales, the inventory of existing homes for sale remains constrained, contributing to ongoing affordability challenges. Low inventory means buyers have fewer options, increasing competition and potentially higher prices. This situation highlights the need for increased housing supply to meet the existing demand.

To further illustrate the recent trends in existing home sales, the graph below highlights the year-over-year percent change in total existing home sales, alongside the seasonally adjusted annual rate (SAAR). This visual comparison underscores the housing market’s resilience, despite the challenges posed by rising mortgage rates and tight inventory.

Total Existing Home sales, Percent change Year-over-Year
Image source
Total existing home sales, SA Annual Rate
Image source

Mortgage Rates and Affordability Challenges

The recent surge in mortgage rates, influenced by the Federal Reserve’s efforts to combat inflation, has undoubtedly impacted affordability for prospective homebuyers. As borrowing costs rise, purchasing power diminishes, potentially deterring some buyers from entering the market and affecting pending sales.

Here’s how rising mortgage rates are affecting affordability:

  1. Current Mortgage Rate Overview:
    • As of July 2024, the average 30-year fixed mortgage rate is 6.35%, up from 7.09% a year ago.
    • This represents a significant increase from the historic lows of around 3% seen in 2020-2021.
  2. Reduced Purchasing Power:
    • Higher mortgage rates translate into larger monthly payments, making it more challenging for buyers to qualify for loans and afford desired homes.
    • For example, on a $400,000 loan:
      • At 3% (2021 rate): Monthly payment of $1,686
      • At 6.75% (current rate): Monthly payment of $2,597
      • This $911 increase significantly impacts affordability, potentially pricing out some buyers.
  3. Shifting Buyer Preferences:
    • Some buyers, particularly those sensitive to interest rate fluctuations, may delay their home search or adjust their expectations, opting for smaller homes or more affordable locations.
    • According to a recent National Association of Realtors survey, 35% of potential homebuyers have shifted their search to lower-priced homes due to rising rates.
  4. Increased Competition:
    • While rising rates may discourage some buyers, those determined to purchase a home may face heightened competition for a limited pool of available properties.
    • This competition can lead to bidding wars, potentially driving up prices even further and making it more challenging for buyers to secure their desired homes.

Regional Variations and Market Outlook

The housing market’s performance varies significantly across different regions of the United States. While some areas experience robust demand and rising prices, others grapple with cooling trends and inventory imbalances. The latest National Association of Realtors (NAR) data provides insights into these regional differences, as visualized in the pie chart below.

eceeaa0c4ae5c9016b0f3a9be0f448d3fff284a57a939f5262788c7d6e753edats1726106693 July 2024 Home Sales Expected to Rise in Existing Housing Market
July 2024 Home Sales Expected to Rise in Existing Housing Market 17

The chart highlights the distribution of existing-home sales across the four key regions: the Northeast, Midwest, South, and West. Here’s a detailed breakdown of regional variations:

  • Northeast:
    Existing-home sales climbed 4.3% from June to an annual rate of 490,000 in July, an increase of 2.1% from July 2023. The median price was $505,100, up 8.3% from last year. This region shows strong demand and significant price appreciation, possibly due to limited inventory and economic stability in major metropolitan areas.
  • Midwest:
    Existing-home sales remained unchanged in July at an annual rate of 920,000, down 5.2% from the previous year. The median price was $321,300, up 4.5% from July 2023. The Midwest demonstrates stability in sales volume with moderate price growth, suggesting a more balanced market.
  • South:
    Existing-home sales increased 1.1% from June to an annual rate of 1.79 million in July, down 3.8% from one year before. The median price was $372,500, up 2.3% from one year earlier. The South shows a mix of growth and cooling, with a slight increase in monthly sales but a year-over-year decline, coupled with modest price appreciation.
  • West:
    Existing-home sales rose 1.4% in July to an annual rate of 750,000, also up 1.4% from a year ago. The median price was $629,500, up 3.4% from July 2023. The West demonstrates consistent growth in both sales and prices, indicating sustained demand despite high property values.

These regional variations highlight several key trends:

  • Stronger Demand in Certain Markets:
    Areas with strong job markets, population growth, and limited housing supply witness relatively strong demand and competitive bidding scenarios. Cities experiencing a tech boom or those with growing populations often see higher demand for housing, leading to faster sales and potentially higher prices. 
  • Cooling Trends in Others:
    Regions facing economic headwinds, declining affordability, or an oversupply of housing may experience more moderate price growth or even slight declines. Areas heavily reliant on a single industry might see a slowdown in the housing market, with prices stabilizing or declining slightly.

Understanding these regional differences is crucial for both buyers and sellers. Local market conditions, including job growth, population trends, and housing supply, significantly shape real estate dynamics. Prospective buyers and sellers should consult with local real estate professionals to gain deeper insights into their specific market conditions and trends.

Expert Insights and Predictions

Industry experts remain cautiously optimistic about the outlook for the housing market, acknowledging both the challenges and potential opportunities that lie ahead.

Here’s what experts are saying:

Lawrence Yun, Chief Economist at the National Association of Realtors: “While the recent uptick in sales is encouraging, we’re not out of the woods yet. The market is showing resilience, but affordability remains a significant hurdle for many potential buyers.”

Danielle Hale, Chief Economist at Realtor.com: “We anticipate a potential stabilization in mortgage rates by the end of 2024, which could bring some relief to the market. However, the inventory shortage will likely persist, keeping upward pressure on prices.”

Mark Zandi, Chief Economist at Moody’s Analytics: “There’s a 40% probability of a mild recession in the next 12 months, which could lead to a temporary dip in home prices. However, the long-term outlook for housing remains positive due to demographic trends and undersupply.”

Predictions for the coming year:

  • Mortgage rates are expected to stabilize around 6-6.5% by the end of 2024.
  • Home price appreciation is forecast to slow to 2-3% annually, down from the double-digit gains seen in recent years.
  • Inventory levels are predicted to improve slightly but remain below historical averages.

Implications for Buyers and Sellers

House sales
July 2024 Home Sales Expected to Rise in Existing Housing Market 18

Given the current market conditions, both buyers and sellers need to adapt their strategies. Here are some practical tips to navigate the current sales landscape:

Tips For Buyers:

  • Get pre-approved: This gives you a clear picture of what you can afford and makes you a more competitive buyer.
  • Consider adjustable-rate mortgages (ARMs): These may offer lower initial rates, but understand the risks involved.
  • Look for seller concessions: Some sellers may be willing to buy down your interest rate or contribute to closing costs.
  • Expand your search area: Consider up-and-coming neighborhoods or slightly longer commutes for better affordability.

Tips For Sellers:

  • Price realistically: Work with a local agent to set a competitive price based on current market conditions.
  • Highlight energy-efficient features: With rising costs, energy efficiency is increasingly attractive to buyers.
  • Be flexible: Consider offers with contingencies or longer closing periods to accommodate buyers navigating the tight credit market.
  • Invest in minor upgrades: Focus on high-ROI improvements to make your property stand out in a potentially slowing market.

FAQ: July 2024 Home Sales

What factors are contributing to the rise in home sales in July 2024?

The increase in home sales expected in July 2024 can be attributed to several key factors. Firstly, the interest rates for 30-year fixed-rate mortgages are projected to stabilize, making borrowing more affordable for potential buyers. Additionally, the market is seeing an influx of homes for sale, which enhances buyer choice and competition. Moreover, the economic recovery post-2023 encourages first-time buyers to enter the market, further driving demand. Lastly, seasonal trends typically show a spike in existing home sales during summer, making July a prime time for transactions.

How do mortgage rates influence existing home sales?

Mortgage rates are a significant factor in driving existing home sales. When interest rates are low, buyers are more likely to secure financing, which increases the pool of potential buyers and can result in a higher sales pace. Conversely, when mortgage rates rise, as seen in earlier 2023, affordability decreases, making it more challenging for buyers to commit to home sales, thus impacting the sales rate. As rates stabilize or decrease heading into July 2024, we can expect a positive impact on sales in July and beyond.

What is the expected median price for existing homes in July 2024?

This July’s median home sale price has stayed consistent with last year, holding at $439,950. However, the median price per square foot has increased by 3.1%, suggesting a larger share of smaller and more budget-friendly homes available in the market. You can find the data for this information at realtor.com.

What role does the economy play in the expected rise of home sales?

The economy plays a significant role in influencing home sales. A strong economy with low unemployment, rising wages, and consumer confidence can boost demand for housing. When people feel secure in their jobs and income, they are more likely to consider purchasing a home. Conversely, a weak economy with high unemployment and economic uncertainty can dampen demand for housing as potential buyers may become more cautious about making large financial commitments.

Should I consider buying a home now or wait for interest rates to decline?

The decision of whether to buy a home now or wait for interest rates to decline is a personal one that depends on your circumstances and risk tolerance. If you are financially prepared and can afford the monthly payments, purchasing now could have advantages, such as securing a home before prices rise further and benefiting from the current sales environment. However, if you are concerned about interest rate fluctuations and prefer to wait for a more favorable market, you may want to delay your purchase.

Conclusion

The unexpected surge in existing home sales in July 2024 offers a glimmer of hope for a potential turnaround in the housing market. However, challenges remain, including elevated mortgage rates, affordability concerns, and persistent inventory shortages.

As the market navigates these complexities, it’s essential to stay informed about local market trends, consult with experienced real estate professionals, and carefully assess your individual financial situation and housing goals.

Post Tags

Leave a Reply

You Might Also Like

Start typing and press enter to search

Scroll to Top