Experts are confused about exactly where the housing market is heading in the latter half of the year.
“For the most part, we think the housing market will improve over the next half year,” Glenn Kellman, CEO of real estate brokerage site Redfin, said in a May 22 appearance on CNBC's “Money Movers.”
“We hit rock bottom in the first quarter of 2024 and I expect the housing market to do a little better,” Kelman said.
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“The 30-year fixed-rate mortgage is a uniquely American construct.”
Other experts are less confident about the market's prospects for improvement.
“It's a very strange market, and it's hard to predict,” said Jeff Ostrovsky, a housing analyst at Bankrate.com.
Here is some of what Ostrovsky, Kelman and other real estate experts say could shape the real estate market in the second half of 2024:
More homes are coming on the market
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The effect of mortgage rate stabilization appears to be fading, said Orvi Devongi, chief economist at Zillow.
The effect of mortgage rate stabilization, or golden handcuffs effect, prevented homeowners with very low mortgage rates from listing their homes last year because they did not want to finance a new home at a much higher interest rate.
During the week ending June 1, newly listed homes were up 2.1% compared to a year ago, according to Realtor.com's weekly housing trends report. In the same period, available inventory of homes for sale rose 35.5% from a year ago, Realtor.com found.
In his appearance on CNBC, Kellman also noted that demand for homeownership remains high, especially among buyers who have been putting off home purchases for a long time.
While the market is seeing more listings, the increased supply is not enough to attract buyers, according to Doug Duncan, senior vice president and chief economist at Fannie Mae.
“Listings have generally trended upward recently, which indicates to us that a growing number of current homeowners can no longer put off moving,” Duncan said in a statement earlier this month. “However, we believe that ongoing affordability challenges will likely impact how quickly these new listings are converted into actual sales.”
“Some movement” on interest rates
The 30-year mortgage rate fell 6.99% on June 6 after rising 7.22% on May 20, according to Freddie Mac data via the Federal Reserve.
“Mortgage rates are down slightly from their highs in May, but that has not stimulated increased competition among buyers in the housing market,” DeVonge said.
Affordability remains a top priority for buyers and prices have remained above 7% for a long time.
Many experts believe that the Fed is likely to hold interest rates at its next board meeting on June 12. However, the National Association of Realtors expects a possible rate cut by this fall, according to Jessica Lautz, deputy chief economist at NAR. .
By late September, “we'll probably start to see movement on the federal funds rate,” she said. “At least that's our hope.”
While mortgage rates are expected to fall to 6.5% in the fourth quarter, homebuyers may not feel very comfortable as home prices rise amid limited housing inventory, Lautz noted.
“It's very likely that they will end up paying the same mortgage payments because they're buying a home with a lower interest rate, but it's priced higher,” she said.
“It's hard to expect prices to really go down.”
Ostrovsky explained that while the housing market has slowed in terms of the number of transactions, prices have not declined despite broader expectations.
The median home sale price across the U.S. rose to $392,200, a 4.4% increase from the previous year, according to Redfin.
“It is difficult to predict that prices will decrease or decrease at the national level,” Ostrovsky said. “It seems likely that we will see another record rise in home prices this summer.”
Some urban areas in the United States have seen prices decline. Home sale prices fell 2.9% in Austin and 1.2% in San Antonio and Fort Worth, Texas, according to Redfin data. The company noted that home prices fell by 0.9% in Portland, Oregon.
However, many of these areas have seen significant price growth during the COVID-19 pandemic, with prices jumping as much as 45%, Lautz said. Buyers may not see much relief in affordability despite recent price drops given those pandemic-era increases.
About 90% of metro markets had home price gains in 2024, according to NAR data. While price points may be declining in some local markets, “the vast majority of markets are seeing home price growth,” Lautz said.
