A flood of buyers, attracted by lower rates, could bid up prices again
of ConsumerAffairs
Housing experts say home affordability has gradually improved over the last couple of months, but its because of lower mortgage rates. Home prices remain elevated.
The Federal Housing Finance Agencys (FHFA) seasonally adjusted monthly House Price Index rose 4.5% from July 2023 to July 2024. The previously reported 0.1% price decrease in June was revised upward to 0%.
Prices havent gone down, even though home sales have slowed to a crawl. The latest data from the National Association of Realtors (NAR) show sales of existing homes dropped 2.5% in August and were down 4.2% year-over-year. Yet that same data show the median existing-home sales price rose 3.1% from August 2023 to $416,700, the 14th consecutive month of year-over-year price increases.
The FHFA data show price movement varied in July, depending on geography. Prices eased in the South Atlantic region, which includes expensive Florida markets, but rose by nearly a full percentage point in the East North Central and New England regions.
For the third consecutive month U.S. house prices showed little movement, said Dr. Anju Vajja, deputy director for FHFAs Division of Research and Statistics. Gradually declining mortgage rates and relatively flat house prices may improve housing affordability.
How lower mortgage rates might not help
But what happens if mortgage rates fall even more, drawing millions of buyers who have been waiting for affordability conditions to improve? If there is not an increase in housing inventory, simple economics would suggest that home prices would go even higher.
However, in its report on August sales, NAR noted that housing inventory is improving. Total housing inventory at the end of August was 1.35 million units, up 0.7% from July and 22.7% from one year ago. Unsold inventory sits at a 4.2-month supply at the current sales pace, up from 4.1 months in July and 3.3 months in August 2023.
The rise in inventory and, more technically, the accompanying months supply implies home buyers are in a much-improved position to find the right home and at more favorable prices, said NAR Chief Economist Lawrence Yun.
However, in areas where supply remains limited, like many markets in the Northeast, sellers still appear to hold the upper hand.
Photo Credit: Consumer Affairs News Department Images
Posted: 2024-09-25 12:05:58
