Discover the latest trends in the housing market and gain insight into how they could impact your business.

Mortgage lenders are uniquely positioned to help real estate agents and their homebuyers navigate housing trends and current challenges in the housing market.

With the persistent challenge of higher mortgage rates and low inventory of homes on the market, homebuyers continue to face big decisions when it comes to their homeownership goals.

First-time homebuyers are struggling with affordability due to high real estate prices, while move-up buyers are reluctant to give up an existing low mortgage rate even if they want or need to purchase a new home. Despite these obstacles, in addition to a highly competitive marketplace that favors the seller, latest industry data is providing a glimmer of hope that the housing market may be moving off the bottom.

Some industry forecasts are predicting higher home sales, increasing new home construction and, potentially, lower mortgage rates in the second half of the year. Buyers also are finding financing solutions that are helping them bridge the gap on higher costs.

Home sales are trending higher in 2024 and 2025.

U.S. home sales are down on historic highs but by no means out. According to Fannie Mae’s May Housing Forecast, the number of total 2024 home sales is expected to be 4.89 million and will rise another 9.98% to 5.29 million in 2025.1

Single-family home mortgages are expected to grow 14% in 2024.

While higher interest rates are creating some pain points in the housing market, they have not frozen mortgage lending. Fannie Mae predicts that mortgage originations specific to single-family home purchases will total $1.4 trillion in 2024, which represents a 14% increase from 2023. A further 13% growth in purchase volumes is expected in 2025.1

Successfully navigating the current marketplace requires working with experienced and knowledgeable mortgage lenders who understand current market dynamics and can provide the financing options and analysis necessary to meet a client’s homebuying objectives.

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Outlook on affordability remains mixed.

Affordability remains a big hurdle, particularly for first-time homebuyers. To the positive, buyers could see some improvement in mortgage rates later this year, as the Fed has indicated that rate cuts are still on the table for 2024. Fannie Mae is forecasting that the 30-year fixed rate will average 7% by the end of 2024 and 6.7% in 2025.1

At the same time, buyers are not getting a break on home prices. According to the National Association of Realtors (NAR), the median existing-home sales price climbed for the eleventh consecutive month to $419,300 in April, which represents a 5.8% year-over-year price gain.2

Beware trying to time the market.

A common question buyers wrestle with is whether now is the right time to buy. Timing the market to get the optimal value is incredibly difficult. Even if mortgage rates do fall in the second half of the year, it’s difficult to predict whether home prices will increase, decrease or stay the same.

 

Inventory of for-sale homes is expected to increase.

The high-rate environment is discouraging some owners from selling because they don’t want to give up an existing lower-rate mortgage. Less turnover is therefore contributing to what has been a persistent undersupply of for-sale homes.

According to NAR, the current home inventory on the market as of May represents a 3.7-month supply, which is below the five to six months considered to be a healthy level for a balanced market but up 6.7% from the previous month.2

New data suggests that there is at least some relief ahead in terms of increased inventory. According to a new report from Redfin, new listings of U.S. homes for sale rose 0.3% month over month in May, attributing to an overall increase of 8.8% year over year.3

According to Fannie Mae’s May Housing Forecast, new home construction is expected to continue at a solid pace over the next two years. This is despite single-family starts falling by 8.7% in March, followed by a 0.4% decline in April, as homebuilders work to offer incentives to move existing inventories.1

Data highlights market turbulence.

Although forecasts are trending positive, there is still some near-term turbulence that is showing up in market data.

Highlights from the May NAR report2 include:

  • Existing-home sales declined 0.79% in May to a seasonally adjusted annual rate of 4.11 million. Similarly, sales retreated 2.8% on a year-over-year basis.
  • Total housing inventory registered at the end of May was 1.28 million units, up 6.7% from April and 18.5% from one year ago (1.08 million).
  • The Pending Home Sales Index (PHSI) – a forward-looking indicator of home sales based on contract signings – decreased to 70.8 in May, down 2.1% from April. Year-over-year, pending transactions were down 6.6%. (An index of 100 is equal to the level of contract activity in 2001.)

Adapting to a new normal in the housing market

It’s important to look at housing market trends in the context of the broader economy. Despite recent weakness in single-family home sales, many homebuyers are in a strong financial position. According to the Bureau of Labor Statistics, the national unemployment rate remained near historic lows at 4% in May (up 0.3% from a year earlier). As of March, annual wage growth continues to hover near 4.4%.4

History clearly shows that there is a path to homeownership across all market cycles and in all interest rate environments. In the current environment, loan officers are educating homebuyers on programs and solutions that can help to bridge the gap on affordability. For first-time homebuyers in particular, there is more focus on state programs that offer subsidized interest rates or down payment assistance programs.

Working with a knowledgeable mortgage lender can help homebuyers understand the various mortgage options available to them that include conventional loans and various government guarantee home loan products, such as those backed by the Federal Housing Administration (FHA), United States Department of Agriculture (USDA) and Veterans Affairs (VA). Loan officers also work closely with homebuyers and their realtors on pre-approvals and financial analysis to show how different financial scenarios can impact mortgage costs and buying power.

Encouraging your clients to engage with a U.S. Bank mortgage loan officer early in the process, regardless of real estate market conditions, can help them understand their financial options, as well as set realistic goals and a budget.

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Disclosures

Loan approval is subject to credit approval and program guidelines. Not all loan programs are available in all states for all loan amounts. Interest rate and program terms are subject to change without notice. Mortgage, Home Equity and Credit products are offered through U.S. Bank National Association. Deposit products are offered through U.S. Bank National Association. Member FDIC.

This is not a consumer credit advertisement and is intended for homebuilder and real estate agent use only. This information is provided to assist homebuilders and real estate agents and is not a consumer credit advertisement as defined by Regulation Z.

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  1. Fannie Mae. “Economic & Housing Outlook: Economic Developments – May 2024.” Accessed June 20, 2024. https://www.fanniemae.com/research-and-insights/forecast/economic-developments-may-2024

  2. Copyright ©2024 “Existing-Home Sales Edged Lower by 0.7% in May as Median Sales Price Reached Record High of $419,300.” National Association of Realtors, June 21, 2024. Accessed June 21, 2024. https://www.fanniemae.com/research-and-insights/forecast/economic-developments-may-2024

  3. Katz, L. (2024, June 14). “Home Sales Fell to One of the Lowest Levels on Record in May.” Redfin. Accessed June 20, 2024. https://www.redfin.com/news/home-sales-fall-to-near-record-low/

  4. U.S. Bureau of Labor Statistics. (2024, June 7). Employment Situation Summary. https://www.bls.gov/news.release/eci.nr0.htm

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