With the spring buying season well underway the market is seeing some positive light at the end of the tunnel. March Pending Home Sales were up, March New Home Sales jumped while price gains somewhat stabilized.

However, the existing home sale market is still under constraints from low inventories. So, where do potential buyers look for a purchase? Well, 30% – 40% of homebuyers are now purchasing new homes, as reported by the National Association of Home Builders and Redfin. With inventories well above the 6-month average currently at 8.3 months, a record 32% of purchases were new homes in the fourth quarter of 2023 where the range was historically 10% – 12%. To make new homes more affordable, smaller homes are being built to meet customer demand.

New Home Sales in March rose nearly 9%, the highest since September of last year. The National Association of REALTORS® (NAR) recently reported that Pending Home Sales were up 3.4% in March and is a forward leading indicator of home sales. “March’s Pending Home Sales Index marks the best performance in a year,” said NAR Chief Economist Lawrence Yun.

Home prices rose 0.6% in March from February and the same from January to February while year-over-year prices rose 7.3%, not much of a change from the prior month’s 7% annual increase.

So, what lies ahead? The NAR forecasts that existing home sales will rise by 9% in 2024 while Housing Starts are expected to rise by 1.2%. The NAR is also forecasting that mortgage rates will slowly decline in 2024 and hit 6.75% by year’s end. Freddie Mac says mortgage rates will stay above 6.5% through this quarter and next. Fannie Mae is estimating that the 30-year mortgage rate will end 2024 at 6.4% while the Mortgage Bankers Association is a bit more positive predicting 6.1% by the year’s end.

Bottom line: There are a lot of numbers above but what it comes to is can you afford the new purchase and be comfortable with the payments if taking out a mortgage? Housing demand will always be constant no matter what type of economy.

Source: Mortgage Market Guide

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