Wall Street analysts had hoped the housing market would show signs of life in 2024. Instead, it remained stagnant.
That’s largely due to a bumpy road for mortgage rates this year, along with low supply and record home prices.In January, the average 30-year fixed mortgage rate hovered around 6.6%. according to Freddie Mac.
Now, despite the ups and downs, the exchange rate is hovering around the same level. It stood at 6.72% by Wednesday, compared with 6.6% a week ago. according to Freddie Mac.
Because the cost of borrowing hasn’t fallen, it hasn’t caused any significant movement in buying and selling activity. In fact, pre-owned home sales are poised to set a record for the worst year since 1995.
“I thought this year we’d see the housing market freeze start to thaw and we’d see some activity,” Windermere Real Estate Chief Economist Jeff Tucker said in an interview.
Housing activity had a difficult start this year. Mortgage rates, which had been falling until 2023, rose, then started to rise again in February, with the average 30-year rate hitting 6.77 percent midway through the month. Freddie Mac data.
Adding to the pressure of rising interest rates, the National Association of Realtors (NAR) reported that the median home sale price rose 5.7% from last February, marking the eighth consecutive month of year-over-year price increases.
High home prices put off many budget-conscious buyers Pending home sales, a forward-looking measure of home sales based on contract signings, fell 7% year-over-year in February.
However, there were reasons for optimism. Data from Redfin showed this new listings up 10% Year-over-year in the four weeks ending Feb. 18, the biggest gain in two months as homeowners took advantage of rising home prices.
“Inventory did improve, but remained tight in many markets, sales activity was weak and mortgage rates were choppy,” Ali Wolf, Zonda’s chief economist, told Yahoo Finance.
Wall Street analysts had hoped that the housing market would recover in 2024. Instead, it remained stagnant. Pre-owned home sales are on track for the worst year since 1995. (Photo by Paul Bersebach/MediaNews Group/Orange County Register via Getty Images) ·MediaNews Group/Orange County Register via Getty Images via Getty Images
Despite an early round of buying activity, that didn’t lead to sales of existing homes falling 4.3% to a seasonally adjusted 4.19 million per NAR up about 7%further contributing to the slowdown.
“A lot of people were surprised that home prices didn’t go down as mortgage rates went up. This showed us that the supply and demand imbalance is stronger than the cost of borrowing,” Wolff said.
By summer, mortgage rates reversed course and began to decline as new data have shown that inflation was slowing down. In June, the Fed held interest rates steady and predicted one rate cut for the year.
That still wasn’t enough to dissuade some would-be homebuyers, as high costs remained a major hurdle. National Association of Realtors data showed existing home sales fell 5.4% in June from a year earlier. the median price reached $426,900, a record high for the second month in a row.
High housing costs “have thrown cold water on homebuyers who were expecting a real turnaround in conditions,” Tucker said.
But sales didn’t improve as many potential buyers and sellers, locked into historically low borrowing costs, played the waiting game. Existing home sales fell The lowest level since 2010 during the month of September, according to NAR.
House hunters were hoping that mortgage rates would fall further when the Fed cut rates to start buying in earnest.The Federal Reserve cut its benchmark interest rate half a percentage point on September 18. But many economists warned that mortgage rates have been unlikely to fall much further.
In fact, mortgage rates began to rise. approaching 6.5% in October, as markets adjusted their expectations about the scope and timing of future Federal Reserve rate cuts.
“Historically, mortgage rates move with the Fed’s rate changes,” Wolff said mortgage rates, and they take in other economic data and policy proposals and allocate their funds accordingly.”
As 2024 draws to a close, the rate path looks uncertain.At its December policy meeting, the Fed Two rate cuts are forecast for next year, compared to the previous four forecasts.Investors remain concerned about sticky inflation data and the potential impact of the incoming Trump administration’s policies on price increases.
Analysts say they believe housing activity will lead take 2025 as more homes hit the market with buyers and sellers adjusting to the reality of today’s high interest rates.
In one encouraging sign, existing home sales for November rose 6.1% from a year ago, the biggest annual increase since June 2021, according to the NAR.
“We think it’s going to continue to be a slow uptick,” Realtor.com chief economist Daniel Haley told Yahoo Finance’s Claire Boston.
Dani Romero is a reporter for Yahoo Finance. Follow her on X @daniromerotv:.
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