Homebuyer Demand Falls 11%, Home Prices Could “Soften” in Summer

we're about to enter what is usually the busiest home buying and selling season as we enter the spring and so far in 2024 the housing market has actually been pretty hot prices are up 5% year-over-year and we're starting to see some increases in inventory which is encouraging but as you all probably know there are a lot of headwinds facing the housing market and the broader economy the question is will this hot housing market continue or will we start to see prices start to soften in this video I'm going to provide an update on the current state of the housing market we're going to talk about mortgage rates and where they're going we'll talk about housing prices and inventory and what you as an investor or a perspective home buyer should be thinking about for the 2024 housing market but before we get into today's video let me ask you do you want to dive deep into commercial real estate entrepreneurship leadership and the economy if you do tune in to the Walker webcast it's hosted by Willie Walker the C CEO of Walker and Dunlop one of the largest commercial real estate finance and advisory firms in the country as one of the top 1 a half% of podcasts globally and with over 10 million views The Walker webcast brings together Brilliant Minds from Broad and varied backgrounds you can fire up the Walker webcast on your favorite podcast app join live on Wednesdays or catch the replay on demand and it's more than just commercial real estate you'll get insights for really your entire life so subscribe now to the Walker webcast at Walker dunlop.com pockets all right so let's just start with a bit of a summary of where we are in the housing market at least in terms of pricing as I said earlier we're almost up 5% year-over year it's actually 4.7% and it's important to note that even though this is well below where growth rates were in 2020 or 2021 this is above the average the long-term average for home price so we're actually seeing a strong year for residential housing market but the question is can this be sustained and there are a lot of headwinds but the primary headwind that's facing the housing market we all know is affordability affordability uh you probably know what it means but in housing it has a very specific definition which is how easily the average American can afford the average priced home in the US and it's been low for the last year or two but recently just in the last couple of weeks it has actually reached its worst point in 40 plus years meaning that for the average American and it is harder to afford just a regular home than it has been since the early 1980s this comes from a variety of things but the primary reasons are one mortgage rates have shot back up over the last couple of weeks but at the same time prices are still growing and so the combination of those two things high prices and really high mortgage rates means that affordability is low so one of the ways that I like to look at affordability is how much the average mortgage payment is per month so if you just went out and bought the median pric home in the US what would you pay be paying every single month for your mortgage the answer is $2,775 and that is up 11% just from last year and remember rates were already high last year so it's even higher than that and it's way higher than what it was during the pandemic back in 2021 it was about $1,700 so it's almost $1,100 more than it was was just 3 years ago so obviously you can extrapolate this out and see how this is going to pull demand out of the housing market because fewer and fewer people can afford it and again there are many ways to measure demand but one way I like to look at it is redin actually produces something called the red finin home buyer index and this measures a couple of different things but you know they have this platform where people are going on and looking at homes and requesting tours and they create this index of how much demand there is and it's down 11% year-over-year and at one of the lowest points it's been since the pandemic started so the question is will demand continue to decline and leave the market and for that we have to look at the future of mortgage rates now we obviously don't know where mortgage rates are going to go for sure but we can just let me just fill you in on what's happening right now so rates had fallen to about 7% earlier in the year because the FED had announced that they were likely going to cut rates in 2024 the the bond market liked that it went bond yields went down and that led to lower mortgage rates since then that in just the last like two months or so there's been a lot of data that has come out that suggests that inflation is just still too high we see that in the CPE we see that in the pce and there's just all sorts of evidence and this has led the market to believe that the FED is less likely to cut rates and it has sent bond yields soaring and that has pulled mortgage rates up with them now the FED has signaled that they are still likely to cut interest rates this year but that does not mean that mortgage rates are going to come down that much as we talk about a lot on this channel but let me remind you all the FED does not control mortgage rates they influence bond yields and bond yields influence mortgage rates so they do sort of in a way influence mortgage rates but it's not directly it's sort of this secondary tertiary influence on mortgage rates I personally believe that rates will start to come down a little bit but we're still going to be in the mid sixes maybe even the high sixes throughout the rest of this year so when we're talking about demand if rates do come down below that 7% Mark and I kind of think people just have this like psychological aversion to anything over 7% I think if it comes down maybe below 7% on an average we will see a little bit of a tick up in demand but nothing crazy we're not going to all of a sudden start to see people rushing into the housing market so that's sort of how I see Demand right now it's going to be relatively slow it might pick up a little bit if mortgage rates get better but obviously if we want to forecast where prices are going to go through the rest of the year we can't just look at the demand side we also have to look at Supply in the housing market when we talk about Supply there are a couple metrics but the ones I'm going to show you today are active listings which is a measurement of how many properties are for sale at any given time and new listings which which is how many individual people decide to put a property up for sale and they're slightly different and we'll get into that but both really important first things first active listings they are up 10% year-over-year which is really important because one of the primary dynamics of the housing market over the last few years has been that there's not enough supply for demand and that has kept active listings really low right even if a lot of people were listing their properties they were bought so so quickly that if you went and looked for properties at any given point there wouldn't be a lot of them and this increase in active listings 10% year-over-year does suggests that supply and demand Dynamics are starting to shift next let's look at new listings and if you watch this channel you probably know that I have said that new listings for me this is like the metric of 2024 that is as nerdy as it gets to have a metric to watch but for me this is the one that I think is going to be most important in 2024 because we've seen for the last year or two that not a lot of people are listing their houses for sale there's reasons like the Locking effect people are just been staying in their houses longer that happen started even before the pandemic there's all sorts of reasons for this but for the market to fundamentally shift I believe new listings have to go up and that's exactly what we're seeing new listings are up 14% year-over-year which is a pretty healthy clip and I can really only speculate as to why that's happening but my guess is that people are just getting used to higher mortgage rates and life happens right like maybe people wanted to sell their home last year and they thought oh I'll wait until mortgage rates come down but maybe they've just accepted that rates aren't going to come down that much or no one really knows when rates are going to come down and so instead they're going to list their house like they were originally intending because prices have stayed High anyway and so they could probably still fetch a good price when you look at all these Dynamics combined it paints a picture of a slowly shifting housing market it's not changing really quickly but we're starting to see demand come down and at the same time Supply is come going up and that can lead to better balance because we are still skewed very far in One Direction since the pandemic started four years ago we've been in this Dynamic where there are too many buyers for the amount of homes for sale and that's why prices keep going up and you never see anything on the MLS that is slowly starting to shift and I do think it's going to continue Trends right now suggest that we probably will see softer pricing heading into this summer that's just how economics works right if demand is going down and Supply is starting to go up pricing is going to be softer now I don't know if that means that they're going to turn negative and we're going to see somewhat of a correction and to be clear I am not saying that I think there is going to be a crash anytime soon I been saying for years I don't think that there is a housing crash imminent and I still think that but I think prices could get closer to Flat in many markets and in some markets they may turn modestly negative and of course all the data that I've been sharing in this video so far is all national and really if you want to understand what's going on and make a decision about your own life you need to look at how these Trends and how these metrics are shaping up in your local market you can do that on red fin or there's a lot of other websites that provide similar data to what I've shown you here for your local market so go look at demand go look at active listings go look at new listings in your Market to understand you know is Supply going up is it going down is demand going up is it going down and that will help you make decisions about one whether you should be jumping into the market right now and two if you're going to jump into the market how aggressive you have to be on your offers or how willing a seller might be to negotiate that's all I have for you guys today hopefully this update on the housing market is useful to you as we enter the busy season of 2024 thank you all so much for watching see you guys soon [Music]

Channel: BiggerPockets

Views: 39,312

Keywords: housing market, housing, home prices, housing market prediction, housing market predictions, housing market forecast, 2024 housing market, housing market 2024, real estate market, housing prices, affordability, home market, real estate, housing market update, housing market news, housing market bubble, real estate bubble, buying a home, selling a home, real estate investing, invest in real estate, mortgage rates, interest rates, the fed, invest, biggerpockets, dave meyer

Id: 03O3wthggQs

Length: 10min 53sec (653 seconds)

Published: Tue Apr 30 2024