Yet the U.S. housing market faces unprecedented headwinds. Purchases of existing homes, which make up the bulk of the market, are lagging well below last year’s sales. Based on year-to-date sales as of July 2024, sales of existing homes are down about 1.3% from the first seven months of 2023. This decline is representative of a larger trend. As a result of rising mortgage rates since 2022, the housing market has slowed drastically.
This uptick in available housing inventory has prevented a more severe housing shortage from exacerbating inflationary supply-and-demand imbalances. Nationally, the total inventory of homes for sale—the number of active listings—rose for the 21st consecutive month. Active listings have shot up almost 25% over last year at this time. This sudden change in dynamics is leading a lot of sellers to adjust their pricing expectations if they want to compete for buyers.
In some markets, price cuts have started to trend up. By July, the median home listing price was down 4.9% year over year in Austin. Naturally, that means that, like Miami, the nation’s most expensive housing market in San Jose did experience a year-over-year decrease of 4.7%. Even with these localized drops, the national median home listing price rose again, reaching $439,450 this July, up 0.1% month over month.
The constant difficult features in the market have forced prospective home buyers like Lindsay Olesberg—who finances with HUD when needed. After John relocated for a new job in Texas, the couple listed their four-bedroom, three-and-a-half-bath home outside Albuquerque for $835,000. But they finally took an offer that was a full $40,000 less than their asking price.
Another example was long-time South Florida resident Tammy Tullis, who put her four-bedroom, four-and-a-half-bath home in South Miami on the market at $1.3 million. After receiving no offers at her initial price, she agreed to reduce her asking price to about $1.28 million. Tullis expressed her frustration with the market conditions, stating:
“They were like $400,000-$500,000 off the mark.” – Tammy Tullis
Even with these modifications, Tullis made sure to stress that she is not looking to quickly flip her house. “I do want to sell, but I’m not in a hurry,” she said.
The continued decline in home sales is further evidence of the lagging effect of the recent rise in mortgage rates. In fact, economists anticipate that the average rate on a 30-year mortgage will remain in the mid-6% range. This will likely be the case for the remainder of the year. Currently surging inflation and interest rates have forced many prospective buyers to reconsider what they can afford. According to a recent analysis by a real estate listing company, the maximum amount a homebuyer earning the median U.S. household income can afford is approximately $298,000.
Doug McCormick’s experience is emblematic of what many sellers are going through right now. His home—which originally belonged to his mom—has been on the market for around two months. Although it has held three open houses, it has yet to get any bids.
Industry experts point to the fact that the market is experiencing an unusually high number of price cuts. Unfortunately, these cuts can’t always bring buyers to the table. Annie Foushee remarked on this phenomenon, stating,
“Even though we are seeing a substantial amount of price reductions, sometimes it’s not enough to move the home; it’s still sitting.” – Annie Foushee
So in many places–particularly in the South and West–potential homeowners are hot sellers’ markets. They usually free up better offers to land the interested buyer. These trends, while encouraging in their own right, expose the challenges of today’s housing market. Buyers are getting pickier, making sellers’ competition that much stiffer.
As these dynamics continue to unfold, both buyers and sellers will need to adapt to an evolving market characterized by shifting prices and changing expectations. NAHB’s outlook for the housing market remains cloudy. Economic factors and buyer sentiment will play a significant role in determining activity in the coming months.
