Real Estate Rundown December 2024

Photo courtesy of  Ruliff Andrean  via Unsplash 

Housing Market Predictions for 2025

As 2025 approaches, the housing market shows signs of gradual improvement, with Zillow predicting modest 2.6% home value growth and a slight increase in home sales. More inventory is expected to loosen market constraints, offering buyers increased leverage and options. Mortgage rates are projected to fluctuate, with dips creating opportunities for refinancing and purchases, though their unpredictability persists. Buyers’ markets are likely to expand in the Southwest, favoring buyers in negotiations, while affordability challenges remain. The trend toward smaller, more affordable homes reflects shifting preferences, and rents are stabilizing following a construction boom.

Jump in Pending Home sales Means a Positive End to 2024

The housing market is showing renewed momentum, as the National Association of Realtors' (NAR) Pending Home Sales Index (PHSI) rose 5.4% year-over-year in October, marking its highest level since March. Pending sales increased across all regions, with the West leading at 9.8% growth month-over-month. NAR credits steady job growth and rising inventory for spurring demand despite higher mortgage rates. Existing-home sales also saw a 2.9% annual increase in October, the first since mid-2021, suggesting a stronger finish to 2024. However, new-home sales dipped 9.4% annually, largely due to challenges in the South, including hurricanes and rate pressures, signaling a mixed recovery.

Buyers Give in To Mortgage Rates

Mortgage applications and home sales are rebounding despite higher borrowing costs, signaling that buyer are adjusting to the "new normal" of mortgage rates around 6% to 7%. Applications rose 2% last week, with FHA loans seeing a significant boost, particularly among first-time and moderate-income buyers. Inventory loosening in some markets and slightly lower FHA rates are helping drive activity. Existing-home sales increased 3.4% month-over-month in October, marking the first annual gain in over three years. Economists suggest life events and growing inventory will continue motivating buyers and sellers, even as homeowners remain cautious about trading lower-rate mortgages. 

After Rates Drop, Mortgage Demand Increases

Mortgage demand surged 6.3% last week as mortgage rates dipped slightly to an average of 6.86%, prompting homebuyers to act on pent-up demand. Purchase applications rose 12% from the prior week and were 52% higher than the same time last year, driven by improved for-sale inventory and a strong economy. The average loan size increased to $439,200, reflecting continued buyer activity despite elevated rates. Refinance applications dropped 3% for the week but were significantly higher than last year, though holiday timing affected comparisons. Analysts expect further rate fluctuations as key economic data and seasonal market dynamics unfold.

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