The National Association of Realtors’ chief economist recently declared that the housing recession is finally coming to an end. With lower mortgage rates and a promising increase in home sales predicted for the upcoming year, the outlook appears optimistic.
In June, pending home sales experienced a modest 0.3% increase compared to the previous month, marking the first positive month-over-month change since February. Lawrence Yun, the chief economist of the trade group, expressed his confidence, stating, “The recovery has yet to fully materialize, but it is undeniably clear that the housing recession is now behind us.”
However, the current state of the housing market is complex. Existing-home sales in June were approximately 19% lower than those of the previous year, while pending-home sales, which provide insight into future market activity, were down by 15.6%. Interestingly, new home sales saw a significant increase of about 24% compared to the previous year as potential buyers sought out newly constructed options.
Despite these positive signs, prospective homeowners still face obstacles due to high housing costs. Peter Boockvar, an economist and the chief investment officer of Bleakley Financial Group, emphasized this point, stating, “The affordability challenge has not mysteriously disappeared for first-time homebuyers.” In fact, he pointed out that the pending home sale index itself is only slightly above the lowest level recorded since 2010, excluding the impact of the Covid-19 pandemic.
The housing market is undoubtedly in a state of transition. While there are distinct challenges ahead, the industry anticipates a gradual recovery. With favorable mortgage rates and an increased demand for new homes, the future holds promise for both buyers and sellers alike.
The Resilience of the Housing Market
Recent data indicates that the housing market in the United States has successfully rebounded from the recession it faced last summer. This recovery can be attributed to a rise in pending sales during the month of June, despite the rapid increase in mortgage rates. Lawrence Yun, an expert in the field, believes that this growth signifies the end of the housing recession.
The strengthening of home prices over the past few months also supports this claim. Although prices have not yet reached the record-breaking highs of last year, they have consistently improved. Additionally, the construction of new homes has experienced an upswing, with single-family starts in June reaching their highest level since August of the previous year according to Census data.
Yun anticipates that the housing market will have a positive impact on GDP during the third quarter. However, he emphasizes that for consumers, the true measure of a housing recession lies in home prices. Fortunately, it appears that the decline in prices has come to an end and there are indications of a resurgence. This has resulted in multiple offers becoming commonplace and buyers having a decreased likelihood of finding attractive bargains.
The Realtor association’s economic outlook supports this positive outlook. According to their forecast released on Thursday, the median sale price of existing-homes in 2023 is expected to slightly decrease by 0.4%, followed by a 2.6% increase in 2024.
In addition, the trade group’s projections indicate that there will be a substantial increase in the seasonally-adjusted annual rate of existing-home sales in 2024, with a surge of 15.5% after an anticipated decline of 12.9% this year. Furthermore, they anticipate a decrease in the average 30-year fixed mortgage rate from 6.4% in 2023 to 6% in 2024.
With these optimistic developments in the housing market, it is clear that the industry is resilient and on the path to a strong recovery.
Influence of Consumer Price Inflation on Mortgage Rates
The Federal Reserve’s desired conditions for consumer price inflation seem to be calming, according to experts. As a result, mortgage rates appear to have reached their peak.
The positive trend in job additions further supports this notion. If mortgage rates witness a significant decline in the near future, it is expected to trigger a surge of buyers in the later part of the year and potentially extend into the next year.
