Homebuyers in the U.S. are excited for a breath of fresh air in the smog of the recent housing market. Rising inventories and motivated sellers are ready to hold down prices in 2024.
Home prices are rising again after a brief respite, recently experiencing a decline. While this might instill some anxious feelings in future homeowners, there’s adequate evidence that a shift of power in the market is underway. An unexpected and unusual rise in inventory this season has put plenty of existing homes on the market for sale, and sellers are becoming increasingly motivated.
In 2024, this increase in inventory is cooling down hot prices, giving potential homebuyers the reasonable options they’ve been lacking in the recent past. This fall, we’re looking at how the resale inventory scene will change significantly.
According to Redfin Corp, a real estate brokerage, weekly new home listings were sitting at an uncomfortably low 21.6% on a year-over-year basis; last week, they were down 6.7%, showing significant improvement. Analysts expect to see this trend continue to climb.
What’s responsible for these moves? Sellers were listing their homes at record levels in the second quarter of 2022 when rates spiked to avoid a potential market crash. Unfortunately, although anxious sellers were in hefty supply, they ran out, and the market dried up accordingly. Remaining sellers working with low mortgage rates or no mortgage opted to wait and see if interest rates fell. This was coined the ‘mortgage rate lock-in effect,’ defining most of this year. Sellers are now dropping their prices, paving the way for a far more active year in 2024.
While mortgage rates are high, this follows a relatively prominent annual trend, signaling this is part of the norm. In all of 2022, rates had surged to approximately 7%. While sellers prefer to make transactions when lower rates are available, time encourages them to conduct business eventually.
According to Altos Research, 25,000 more single-family homes are for sale than one month ago. This is occurring at a time when inventories are expected to fall. Resale inventories rose by only 2,000 homes over the same four-week period in 2022.
While pending sales are still down over a year-by-year basis, homes getting sold are going fast – a substantial number of them selling within two weeks. The median days of the market for sold homes aren’t rising as quickly as last year, suggesting that sellers are looking to offload their assets promptly – before cold weather hits.
All of these signs are currently pointing to a positive outlook for 2024. We may start to see prices fall again shortly, especially in places that boomed during the pandemic days. Moving is more common everywhere. Birth rates are higher, and the new multi-family housing supply is likely to see some action. As long as this rising inventory trend stays sustained and more sales accrue, home prices won’t be forced to grow.
