Real Estate Rundown August 2024

Photo by Paul Hanoaka via Unsplash

Existing Home Sales Fall 

In June, existing home sales fell by 5.4% to a seasonally adjusted annual rate of 3.89 million, marking a 5.4% decrease from June 2023, according to the National Association of Realtors. Total housing inventory increased to 1.32 million units, up 23.4% from a year ago. The median sales price was $426,900, reflecting a 4.1% increase year-over-year but a slower growth rate than May's 5.8%. Despite lower mortgage rates and increased inventory, many first-time buyers struggled with affordability, leading to fewer sales. Zillow data shows strong demand for well-priced homes, which sold faster than the pre-pandemic norm. Inventory growth is slowing, and the current supply is 4.1 months, higher than May but lower than the previous year. Affordability remains a challenge, but easing inflation may help lower mortgage rates and support a late-season rebound in home buying.

Fed Keeps Rates Unchanged

The Federal Reserve kept benchmark interest rates unchanged at 5.25% to 5.5% for the eighth consecutive meeting, with the Federal Open Market Committee (FOMC) emphasizing careful assessment of incoming data before making future adjustments. The Fed continues to reduce its holdings of Treasury securities and other assets. Despite market anticipation of no changes, analysts now focus on the September meeting for potential rate cuts, driven by cooling inflation and rising unemployment. Fed Chair Jerome Powell highlighted a balanced labor market and normalizing economy, while mortgage rates remain high, affecting home affordability. Analysts predict modest mortgage rate declines but ongoing affordability challenges. Political influences are noted, but the Fed maintains independence in its policy decisions.

Homes Prices on the Rise

Home prices reached another record high in May, with the 20 largest U.S. metros also experiencing increases, posing challenges for buyers facing high mortgage rates and low inventory. The S&P/Case-Shiller Home Price Indices reported a 5.9% annual increase in May, a slight deceleration from April's 6.4% rise. The slowing growth is attributed to a spring mortgage rate surge to 7.2%, which sidelined many potential buyers. Regional variations showed New York City leading with a 9.4% increase, followed by San Diego and Las Vegas, while Minneapolis and Denver saw more modest rises. Economists expect home price growth to slow further in the coming months as the effects of high spring mortgage rates continue to influence the market, potentially easing if the Federal Reserve cuts interest rates as anticipated.

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