Welcome to our April 2024 Real Estate Market Update, where we delve into the latest trends and insights shaping the ever-evolving real estate landscape. As we progress through the year, it’s crucial to remain on top of the dynamic shifts and emerging opportunities in the market. Join us as we scrutinize key indicators, delve into market dynamics, and offer invaluable insights to empower you in making informed decisions in your real estate ventures. Whether you’re a seasoned investor, a prospective buyer, or simply curious about the state of the market, our comprehensive update is designed to navigate you through the intricate world of real estate in April 2024.
The Inflation Report's Surprising Heat Will Prolong Higher Mortgage Rates
The March inflation figures exceeded expectations, leading to a likely delay in rate cuts by the Fed until July or potentially September. Consequently, the number of expected cuts for the year may reduce from 2 or 3 to 1 or 2. This extension of current rates is expected to persist through the peak homebuying season, keeping mortgage rates elevated for a longer duration. Mortgage rates are poised to experience an increase today, signaling a likelihood of remaining elevated for an extended period, possibly throughout the peak spring and summer home buying seasons. The ten-year treasury yields surged approximately 12 basis points (bps) following this news, leading to a rise in daily average mortgage rates from 7.06% to 7.29%. Despite mortgage spreads (the variance between 10-year treasury yields and mortgage rates) having reduced from over 300 bps to approximately 270 bps in recent months, indicating that the bond market's downturn hasn't impacted mortgage rates as significantly as last year, today's market shift suggests a reversal in this trend. Mortgage rates are now increasing at a faster pace than the 10-year yield, implying that today's data and its implications for the Fed will likely maintain elevated mortgage rates in the near future. Unless new economic data emerges to prompt an earlier rate cut by the Fed, both homebuyers and sellers may not experience substantial relief, if any, during the typical peak homebuying season.
March Sees an Unexpected Plunge in New-Home Construction, Signaling Trouble for Homebuyers
Last month saw an unexpected drop in new-home construction, presenting a concerning development for homebuyers who are already facing a scarcity of homes available for sale. The U.S. Census Bureau and the U.S. The Department of Housing and Urban Development released data on Tuesday showing that housing stats in March fell by 14.7% from February, reaching a seasonally adjusted annual rate of 1.321$ million. This represents a 4.3% decline compared to the same period last year. This decline, the largest monthly percentage decrease since April 2020 at the start of the COVID-19 pandemic, brings construction figures to their lowest since August of the previous year.
Economists had predicted a smaller decline, making this unexpected drop in new construction a concerning signal for homebuyers. Given the ongoing shortage of homes available for resale, newly constructed homes have played a vital role in meeting housing demands for buyers.
Hannah Jones, Senior Economic Data Analyst, commented on the situation, noting that while February showed promising numbers, March’s construction data aligns more closely with previous trends. Increasing the inventory of homes available for sale or rent will be crucial in addressing rising rent and housing prices in today’s market, especially as existing homeowners find it challenging to sell due to high prices and mortgage rates.
Housing Market Report: New Record Set for Monthly Payments - Expect Continued High Costs Amid Inflation News
Daily average mortgage rates have surged to their highest point in almost five months following the recent inflation report, indicating that mortgage rates are likely to remain elevated in the coming months. The median monthly housing payment in the United States has also reached a new peak at $2,747 over the four weeks ending April 7, marking an 11% increase compared to the previous year. This rise in housing payments is attributed to the combination of high home prices and mortgage rates.
The median home-sale price has climbed to $378,250, showing a 4.5% increase year over year and coming close to the record high seen in June 2022. Despite the 30-year fixed mortgage rate of 6.82% being lower than the nearly 8% rates experienced last October, it remains substantially higher than the lows observed during the pandemic.
Persistent high prices are sustained by strong demand in the housing market. The Redfin Homebuyer Demand Index, which measures requests for tours and other services from Redfin agents, has surged to its highest level since last July. Additionally, tour requests have surged by 33% since the beginning of 2024, surpassing last year’s increase for the same period (partly due to the timing of Easter last year). Although there has been a 14% year-over-year increase in new listings, inventory remains low compared to typical spring levels, leading to competitive conditions for available homes.
Sources:
“Housing Market Update: Monthly Payments Set New Record–and Buyers’ Costs Will Likely Stay High on Inflation News” Redfin, 2024. Dana Anderson
“Hotter-Than-Expected Inflation Report Will Keep Mortgage Rates Higher For Longer” Redfin, 2024. Chen Zhao
“New-Home Construction in March Plunges Unexpectedly in Troubling Sign for Homebuyers” Realtor.com, 2024. Keith Griffith
