Median home prices did not fall in any of the 50 most populous U.S. metro areas in the four weeks ended April 28, according to Redfin. This is the first time since July 2022 that all cities have seen prices stagnate or rise. Number dropped: San Antonio, Texas.
Rising house prices in major cities are only one indicator of the health of the real estate market and do not necessarily mean that the residential market will move toward more stable growth. Although average 30-year fixed mortgage rates have declined after reaching a five-month high in late April, demand and purchase applications are still down year over year. However, the continued low supply of available inventory has led to rising home prices, with both the median asking price and the median sales price at all-time highs.
Current real estate market indicators
What do these recent trends mean for investors? Let’s take a look at what happened.
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After falling slightly in late April, mortgage purchase applications began to grow as mortgage rates fell. According to the Mortgage Bankers Association’s weekly survey, both the seasonally adjusted and unadjusted purchase index rose 2% in the week ended May 5, with FHA loan applications increasing 5% but declining compared with the same period last year. 17%. Homes priced over $1 million saw the largest increase in loan applications.
Additionally, the seasonally adjusted Redfin Homebuyer Demand Index, which reflects demand for travel and other services from Redfin real estate agents, fell to its lowest level in two months, down 13% from the year ended May 12 . “Homes for sale” fell 8% from the previous month and 15% compared with the same period last year.
According to family travel technology company ShowingTime, travel activity has decreased over the past few days. Before May 12, the increase in screenings compared to the first week of the year exceeded the increase in the same period in 2023.
Average mortgage rates are trending downward, but potential homebuyers may be waiting for bigger changes before entering the market, especially with inventory low and average mortgage payments at historically high levels.
Listing and sales activities
Redfin’s two most recent reports show that pending sales are down, falling 3% or more every four weeks compared to the same period last year. However, new listings increased by 10% compared with May 2023. The number of active listings increased by 14.2% compared with the same period last year.
Competition remains fierce, but there are signs that the market is shifting to a more balanced market. There is now a 3.2 month supply. This is an increase of 0.5 percentage points from last year, but still indicates a seller’s market. The share of homes sold within two weeks dropped slightly to 45.2% from 49% a year ago, and the share of homes sold at a reduced price was 6.3%, the highest rate reported by Redfin since November 2022.
market level data
The increases have been most pronounced in some expensive and competitive housing markets, such as Anaheim and San Jose, Calif., and West Palm Beach, Fla., but also in some affordable cities where economic growth and demand for housing have increased in recent months. This happened. San Antonio’s median sales price fell -0.5%, but the other 49 most popular cities remained flat or increased.
The number of homes for sale increased in 12 major cities, but declined significantly in Phoenix, Atlanta, Houston, West Palm Beach and Nashville. Only six metropolitan areas saw a decrease in new listings, with Chicago showing the largest decline of 8.1%.
Will mortgage rates fall?
The average 30-year fixed mortgage rate has declined steadily in recent weeks, falling to just below 7% on May 16, according to Mortgage News Daily’s daily survey. That’s still high compared with the low interest rates investors enjoyed in the years leading up to a 2022 Fed hike, and even compared with earlier this year.
But mortgage rates are unlikely to fall significantly in 2024. Most economists expect the federal funds rate to remain above levels last seen a decade before the 2022 rate hike, at least through the end of 2025.
What these signs mean for real estate investors
If rates fall as slowly as most economists expect, the lower rates may not bring much mortgage payment relief as home prices rise. Meanwhile, demand remains sluggish and even a slow increase in available inventory has eased competition. This could make now the best time to buy a property and potentially take advantage of house price appreciation, which could continue or even accelerate as demand picks up.
As always, the best decision will depend on your personal market and available inventory. If you can’t find a property that generates cash flow, it doesn’t matter if the real estate market has a green light or a red light. And, with so few homes to choose from on the market, finding the right property may be your biggest challenge.
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Notes on BiggerPockets: These are the opinions written by the author and do not necessarily represent the views of BiggerPockets.
