"Mortgage rates decreased for the second consecutive week,” Sam Khater, Freddie Mac’s chief economist, said in a statement. “Given the news that inflation eased slightly, the 10-year Treasury yield dipped, leading to lower mortgage rates. The decrease in rates, albeit small, may provide a bit more wiggle room in the budgets of prospective homebuyers.”

Mortgage rates have been on a repetitive see-saw lately, bouncing between the mid-6% range and to over 7%, so whether this week’s movement will make a difference in the sluggish spring housing market remains to be seen.

"Mortgage rates remain stubbornly close to 7%,” says Realtor.com® economist Jiayi Xu. “To see mortgage rates dip further below 7%, persistent evidence showing inflation back on the path to 2% will be necessary.”

Until then, buyers might want to focus instead on the housing market breakthrough that’s been four years in the making.

“Last week saw the highest number of homes for sale since August 2020, a significant milestone,” says Realtor.com senior economic research analyst Hannah Jones in her latest analysis. “The recent strength in listing activity means buyers are seeing more homes for sale than they have seen in almost four years.”

Will a rush of homes hitting the listing pages tempt both buyers and sellers to accept high mortgage rates and dive in? Here’s what the latest real estate data means for homebuyers and sellers in our most recent installment of “How’s the Housing Market This Week?"

The latest mortgage rate outlook

Despite this week’s dip, mortgage rates have remained stubbornly high, largely powered by the robust economy.

Though the Federal Reserve had promised to lower key interest rates in 2024, it has yet to do so as economic reports have been coming in strong. (Though the Fed does not set mortgage rates, the two numbers often move in the same direction.) Yet this week, a report showed that inflation fell from 3.5% in March to 3.4% in April.

“This week’s consumer price index inflation data showed improvement, a welcomed sign of progress which can positively affect mortgage rates,” says Jones. “The CPI data will likely hold more sway over the policy and economic outlook, which means we may see this positive data reflected in mortgage rates in the near term.”

Economist Xu agrees, adding, “While this improvement is a baby step forward, it’s expected to foster stability in mortgage rates at their current level and possibly even trigger further declines.”

While many might be waiting for rates to fall before entering the housing market, some buyers have a workaround for high mortgage rates: larger down payments.

The more money a buyer puts down, the more they “minimize housing payments at a high mortgage rate by minimizing loan size,” explains Jones.

The listing pages hit a four-year high

Buyers who have faced years of scarce listing pages have much to celebrate, given the data for the week ending May 11. The total number of homes for sale was strong, 35% higher than the previous year, marking 27 weeks in a row that homes have been above the previous year’s levels.

“Seller activity continued to climb annually last week and accelerated relative to the previous week’s growth,” says Jones.

However, she notes that the annual amount of fresh listings “was lower than almost every week back to early February, signifying a slowdown in new listings growth.”

New listings were up for the week ending May 11 by 6.6% from a year ago.

“New listing activity will continue to be influenced by mortgage rate movement, but cooling labor market and inflation data could mean things are moving in the right direction,” says Jones.

Home prices remain flat

The median list price didn’t rise or fall for the week ending May 11, remaining unchanged at 0.0%.

“The prices for homes on the market notched in at the same level as one year ago for the second week in a row,” says Jones. (The median-priced home cost $430,000 in April.)

A flood of homes priced in the budget-friendly $200,000 to $350,000 range might have helped to tamp down list prices compared with last year.

The pace of home sales is slowing

The pace of the market softened for the week ending May 11, with homes lingering one extra day compared with the same time a year prior. (The typical home spent 47 days on the market in April.)

“Homes sold slightly slower than one year ago last week but remained within a tight margin of the previous year, as has been the trend over the last couple of months,” says Jones.

As to the reason why, once again, all roads lead to mortgage rates. If rates cool, the pace of home sales will likely tick up.

“Improving mortgage rates could bring buyers back en masse, which could drive up competition and lead to a quicker pace of sale,” says Jones.

However, as Jones notes, it’s also important to note that homes are still selling “faster than pre-pandemic.”
(Realtor.com 5/17/24)

Housing starts rose 5.7% in April from March, to a seasonally adjusted annual rate of 1.36 million, according to data released Thursday by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development. But they fell 0.6 percent from a year ago.

“The modest rebound in housing starts in April confirmed that the slump the month before was a weather-related blip,” says Capital Economics property economist Thomas Ryan. “But the recovery wasn’t as strong as we had anticipated.”

With a dearth of existing homes on the market, new construction has played a key role in meeting buyer demand in recent months. But there are signs that higher mortgage rates are weighing on homebuilders, with a key measure of builder confidence plunging last month. Mortgage rates jumped back above 7% in April, ending the month at 7.17%, according to Freddie Mac.

April’s construction rebound was due solely to a jump in multifamily housing starts, which surged 30% from the prior month to an annual rate of 329,000. Despite the monthly gain, multifamily construction starts are down 25.9% from a year ago and remain well below historical averages.

Single-family home starts were roughly flat from March to April, declining by less than 1 percent. Still, new-home construction was up 17.9% from a year ago.

Where homebuilders are the most active

Housing starts for April dropped on a monthly basis in the Northeast and West, but rose in the South and Midwest.

New construction jumped 19.1% in the Midwest, a gain driven entirely by multifamily units. Likewise, multifamily starts were behind a 10.1% increase in the South. Single-family starts were down less than 1% on the month in both regions.

Housing starts fell 22.6% in the expensive Northeast, with single-family starts falling 13.6% in the region. The West saw a modest overall decline of 2.5%, although single-family starts there ticked up 3.1%.

Builders search for ways to adapt to higher rates

Higher mortgage rates continue to weigh on the housing market in a number of ways, by discouraging sellers of existing homes who are "locked in" at lower rates, and pinching would-be homebuyers with higher monthly payments. Builders have responded by searching for ways to lure homebuyers.

"Single-family homebuilders have not only been dropping prices, but also have been building smaller homes designed to be more affordable to meet starter-home and mid-tier market demand," says Bright MLS chief economist Lisa Sturtevant.

But there are signs that market conditions are starting to weigh on builders. On Wednesday, a key survey of builder sentiment posted its first decline since November 2023.

Builder confidence in the market for newly built, single-family homes was 45 in May, down six points from April, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).

“The market has slowed down since mortgage rates increased, and this has pushed many potential buyers back to the sidelines,” says NAHB chairman Carl Harris.

The May HMI survey also revealed that 25% of builders cut home prices to bolster sales in May. The average price reduction in May held steady at 6% for the 11th straight month.

Builders also reported their use of sales incentives ticked up to 59% in May, from a reading of 57% in April.

Keith Griffith is a journalist at Realtor.com. He covers the housing market and real estate trends. The realtor.com® editorial team highlights a curated selection of product recommendations for your consideration; clicking a link to the retailer that sells the product may earn us a commission.
(Realtor.com, 5/17/24)

he monthly mortgage payment on a typical existing single-family home with a 20% down payment was $2,037 in the first quarter, the National Association of Realtors® said in the report on Wednesday. That was down 5.7% from the fourth quarter of 2023, when mortgage rates hit their recent peak. But the average monthly payment was still up 9.3% from one year ago, an increase of $173.

Families typically spent 24.2% of their income on mortgage payments in the three months through March, down from 26.1% in the prior quarter but up 23.3% from a year ago. First-time buyers typically spent 36.5% of their family income on mortgage payments.

“We know that families are spending more to buy a home in today’s market compared with one year ago and broader historic norms,” says Realtor.com Chief Economist Danielle Hale. “As both home prices and mortgage rates have climbed, families have to choose between not buying, buying and downgrading their must-have list, or buying and putting more of their paycheck toward the purchase.”

The Realtor.com housing report for April found that 68% of the 50 largest U.S. metro areas required a household income of more than $100,000 to afford the median-priced home at current interest rates.

Rates on 30-year fixed mortgages averaged 6.75% in the first quarter of 2024, according to Freddie Mac. That was a decline from the 7.3% average during the final quarter of 2023, but up from 6.37% a year earlier. Since the quarter ended in March, rates have again climbed higher, hitting 7.22% for the week that ended May 2.

In the first quarter, the NAR report found a family needed a qualifying income of at least $100,000 to afford a 10% down payment mortgage in 40.7% of markets. That was down from 47.1% in the previous quarter, reflecting a slight uptick in affordability as interest rates eased.

“Looking at the quarterly improvement, we can see that falling mortgage rates will be able to improve the situation, but we need to see inflation get back to its 2% target before we will see sustained decline in mortgage rates,” says Hale.

Home prices continued to rise for the quarter

Despite the annual increase in rates during the first quarter, home prices rose in 93% of the metro markets tracked in the NAR report. Thirty percent of the 221 tracked metro areas experienced double-digit price gains over the same period, up from 15% in the fourth quarter of 2023.

“Astonishingly, greater than 90% of the country’s metro areas experienced home price growth despite facing the highest mortgage rates in two decades,” said NAR Chief Economist Lawrence Yun. “In the current market, rising prices are the direct result of insufficient housing supply not meeting the full demand.”

The national median price for single-family existing homes climbed 5% from a year ago, to $389,400. That was higher than the 3.4% annual price increase recorded in the prior quarter.

Home prices rose in all regions. The Northeast dominated with 11% annual price growth, while prices also rose 7.4% in the Midwest, 7.3% in the West, and 3.3% in the South.

The majority of the 10 metro areas with the fastest annual home price growth were in the Midwest and Northeast. That’s a shift from recent quarters, when cities in the South dominated the list.

Of the top 10 metro areas with the largest year-over-year median price increases, six were in Illinois and Wisconsin.

Those 10 markets were Fond du Lac, WI (23.7%); Kankakee, IL (22.0%); Rockford, IL (20.1%); Champaign-Urbana, IL (20.0%); Johnson City, TN (19.3%); Racine, WI (19.0%); Newark, NJ (18.8%); Bloomington, IL (18.5%); New York, NY (18.4%); and Cumberland, MD (18.2%).

Eight of the 10 most expensive markets in the U.S. were in California, with cities in Hawaii and Florida also making the list.

“The expensive markets in the West, where home prices declined last year, are roaring back,” Yun said. “Price dips in that region were viewed as second-chance opportunities by many buyers.”
(Realtor.com 5/17/24)

Renters surveyed in February put the probability of ever owning a home in the future at 40.1% on average, according to the Federal Reserve Bank of New York’s annual SCE Housing Survey released on Monday. That’s down from 44.4% a year ago, and the lowest on record dating to 2015.

Hopes for homeownership plunged fastest in the high-priced Northeast, where renters put the probability of owning at 25.8%, sharply down from 51.4% last year. Expectations also fell 6 percentage points in the Midwest, while they stayed roughly flat in the South and ticked up 2.5 percentage points in the West.

Most renters say they would rather own a home if they were able, with 69.9% saying they would either prefer or strongly prefer owning a home if they had the financial resources to do so.

But high mortgage rates, along with home prices that continue to climb, are pushing homeownership increasingly out of reach for many potential first-time buyers.

Mortgage rates averaged 6.78% in February, when the survey was conducted, according to Freddie Mac. For the week ending May 2, the average rate on 30-year fixed mortgages climbed to 7.22%, the highest since November.

The New York Fed survey found that renters’ perceptions about the ease of obtaining a mortgage have declined substantially, with just 10.1% of renters responding that obtaining a mortgage is somewhat or very easy, the lowest combined rate on record.

Meanwhile, 74.2% say that obtaining a mortgage is somewhat or very difficult, up 8.4 percentage points from last year, and well above the 2021 low of 50.5%.

The survey found a grim outlook on future mortgage rates, with the average household now expecting mortgage rates to rise to 8.7% a year from now and 9.7% in three years, both of which are the highest forecasts on record.

Home prices also remain high. National home prices rose 6.4% annually in February, according to data from the S&P CoreLogic Case-Shiller Home Price Index released last week. That was the largest year-over-year rise since November 2022.

The new survey found that respondents on average expect housing prices to increase 5.1% over the next year. That's nearly double the 2.6% expected rate one year ago, and above the average of 4.2% before COVID-19.

Renters also expect to pay more in the coming year, with expectations for rent growth rising by 1.5 percentage points to 9.7%.
(Realtor.com 5/17/24)