Housing Market Trends: October 2024: Rebound in Sight?

The American Dream of owning a home is facing a fresh set of challenges in 2024. This year has been a rollercoaster. The housing market trends in October 2024 showed positive signs of recovery, with existing-home sales increasing for the first time in over three years compared to the same period last year.

Existing-home sales climbed 3.4% in October, reaching a seasonally adjusted annual rate of 3.96 million, indicating a potential turning point in the market after a period of decline. While challenges still remain, particularly for first-time buyers, the increasing inventory, stable mortgage rates, and continued economic growth are contributing to a more favorable environment for homebuyers and sellers.

Let's dive deeper into the key aspects of the October 2024 housing market and explore what this data might mean for the future.

Housing Market Trends – October 2024: Signs of a Rebound?

The Rise in Existing-Home Sales

I was quite surprised to see that existing-home sales increased in October, representing the first year-over-year gain since July 2021. According to the National Association of REALTORS® (NAR), the 3.4% rise in sales represents a significant shift in the market. The report also highlighted that sales advanced 2.9% compared to October 2023, a positive trend that seems to indicate that the housing market downturn might be nearing its end.

This positive trend was evident across all four major U.S. regions:

• Northeast: Sales remained unchanged compared to the same period last year.
• Midwest: Sales increased by 1.1%.
• South: Sales increased by 2.3%.
• West: Sales showed the strongest year-over-year growth at 8.5%.

Median Existing-Home Prices

The median existing-home price also continued its upward trend in October, climbing 4.0% year-over-year to $407,200. This marks the 16th consecutive month of year-over-year price gains, a testament to the continued demand for housing.

In my experience, this sustained price increase is a result of several factors:

• Limited Inventory: The number of homes available for sale has remained relatively low, which tends to push prices higher.
• Strong Buyer Demand: Despite higher mortgage rates, buyers have remained active in the market, driving up demand.
• Inflationary Pressures: Inflation has contributed to higher construction and material costs, influencing home prices.

Housing Inventory and Months' Supply

The number of unsold homes, also known as housing inventory, edged higher in October, increasing by 0.7% to 1.37 million units. This represents a 4.2-month supply at the current sales pace, which is a slight decrease from September but an increase compared to October 2023 when the supply was at 3.6 months.

While this inventory increase is a positive sign for buyers, who now have more choices, it's still below the historical average. We need to see inventory levels continue to rise in order to bring more balance to the market and potentially ease price pressure.

Mortgage Rates and Their Impact

Mortgage rates, while still elevated, have stabilized in recent months. As of November 14, the 30-year fixed-rate mortgage averaged 6.78%, down slightly from the previous week and significantly lower than the 7.44% seen a year ago.

I believe the stabilization of mortgage rates is a key factor contributing to the recent improvement in sales. While rates remain higher than in previous years, the slight decrease offers some relief to homebuyers and makes purchasing a home more accessible for some.

First-Time Homebuyers

First-time homebuyers accounted for 27% of sales in October, a slight increase from September but still lower than the 28% share seen in October 2023. I think this is a concerning trend, as it indicates that affordability issues continue to challenge this segment of the market.

Based on NAR's 2024 Profile of Home Buyers and Sellers, the annual share of first-time buyers was 24%, the lowest ever recorded. This is a significant challenge, as a healthy housing market relies on strong first-time buyer participation.

Investor and Cash Purchases

Cash sales and purchases by investors made up a significant portion of transactions in October. Cash sales represented 27% of transactions, while investors and second-home buyers purchased 17% of homes. While the share of cash sales and investor purchases decreased slightly from September, it's still higher than what we saw a year ago.

I've noticed that investors continue to play a significant role in the housing market, primarily due to the potential for rental income and appreciation in property values. This factor contributes to the ongoing competitiveness in the market for both buyers and sellers.

Distressed Sales

Thankfully, distressed sales, including foreclosures and short sales, remained at a low 2% of all transactions in October. This reflects the current stability of the overall economy and the strength of the housing market fundamentals.

Regional Breakdown

Let's take a closer look at the regional trends in the housing market:

Region	Sales Change (Month-over-Month)	Sales Change (Year-over-Year)	Median Price Change (Year-over-Year)
Northeast	2.2%	0.0%	7.6%
Midwest	6.7%	1.1%	7.2%
South	2.9%	2.3%	0.9%
West	1.3%	8.5%	4.4%

The West has been particularly strong in terms of sales growth, with a robust 8.5% year-over-year increase. The Northeast market is relatively stable, with sales remaining unchanged year-over-year, yet median prices are experiencing a healthy increase. The South and Midwest experienced more moderate sales growth and healthy price increases.

Factors Driving the Market Trends

Several factors are influencing the current housing market trends, including:

• Economic Growth: The continued growth of the economy has contributed to job creation and income growth, leading to increased buying power and demand for housing.
• Stable Job Market: The healthy job market is providing confidence to potential homebuyers, encouraging them to enter the market.
• Improved Consumer Sentiment: Consumers are more optimistic about the future, which is also supporting housing demand.
• Supply Chain Improvements: Supply chain issues have eased somewhat, leading to more inventory and reducing construction costs.

Future Housing Market Trends

I believe that the housing market is heading in a positive direction, although challenges remain. We can expect to see a gradual increase in housing inventory, although supply might still remain somewhat constrained for some time.

I also believe that mortgage rates will likely remain stable in the near term, potentially supporting continued growth in sales. However, there's always uncertainty related to inflation and economic conditions that could impact mortgage rates.

Home prices are likely to continue to rise, but at a more moderate pace, as inventory increases and more new homes are built. I believe that we'll likely see a continuation of healthy price growth, albeit at a slower pace compared to previous years.

First-time homebuyers will continue to face affordability challenges, so it is crucial for policymakers and lenders to explore solutions that can help make homeownership more accessible.

Here are some factors that are contributing to this shift in the housing market to become more buyer-friendly:

• Rising interest rates: Mortgage rates have been rising since last year, making it more expensive for buyers to finance a home. If it continues next year, this is expected to slow down demand and give buyers more leverage in negotiations.
• Rising inflation: Inflation is also on the rise, which is making it more expensive for everyone to live, including homeowners. This could lead to some sellers being more willing to sell their homes at a lower price.
• Increasing inventory: The supply of homes for sale is slowly starting to increase, which is also giving buyers more options.

The cooling of the housing market could be terrible news for sellers, but for buyers, it's great. Yet there is still the problem of sky-high mortgage rates. The bright side is that if buyers hold off, the supply of homes will increase, putting further pressure on sellers to decrease prices. This would constitute a long-overdue course correction for the housing market. Mortgage rates are skyrocketing. Home sales are declining. Supply is improving. We are witnessing a sharp slowdown in the housing market due to higher mortgage rates.

Housing Market Trend #1: Increasing Demand for Affordable Housing

The demand for affordable housing is one of the most pressing issues in the housing market. The rise in housing prices, combined with stagnant wages, has made it difficult for many individuals and families to find safe and secure housing. In 2023, it is expected that access to affordable housing will continue to be a challenge. Innovative solutions will be necessary to address this issue and provide affordable housing options for those in need.

Housing Market Trend #2: Shift toward Suburban and Rural Areas

The COVID-19 pandemic has caused many people to reevaluate their living arrangements, with larger homes and more space becoming increasingly important. This shift in priorities could result in a greater demand for housing in suburban and rural areas, leading to higher prices. This trend is expected to continue in 2023, especially as remote work becomes more prevalent.

Housing Market Trend #3: Rising Home Prices

Despite the economic impact of the pandemic, housing prices have continued to rise due to limited supply and high demand. While this is good news for homeowners, it could make it more difficult for some individuals to enter the housing market. The trend toward rising home prices is expected to persist in 2023, particularly in urban areas where the supply is limited.

Housing Market Trend #4: Stricter Mortgage Standards

As the economy recovers and interest rates rise, mortgage lenders may become more cautious about who they lend to. This could make it more difficult for some individuals to qualify for a mortgage and realize their dream of homeownership. Stricter mortgage standards are a potential barrier for those seeking to enter the housing market.

Trend #5: Increased Investment in Technology

The pandemic has accelerated the adoption of technology in the real estate industry, with virtual home tours and digital transactions becoming more common. This trend is expected to continue in 2023, with technological investments helping to streamline the home buying and selling process. Technology could also play a role in addressing the challenge of affordable housing, with innovations such as modular homes and 3D printing.

Hence, the housing market in 2023 will be shaped by economic, social, and technological factors. While predicting the future is never easy, understanding these trends can help individuals and policymakers make informed decisions about the housing market. It is important to address the challenge of affordable housing, as well as the potential barriers to homeownership such as rising home prices and stricter mortgage standards. Technological innovations are also likely to play a critical role in shaping the housing market in the coming years. By keeping these trends in mind, stakeholders can work towards creating a housing market that is equitable, accessible, and sustainable for all.

Benefits for Homebuyers in 2024's Housing Market

There are a few potential benefits for homebuyers in the current real estate housing market:

• More choices: While the supply of homes on the market is still relatively low, it has increased slightly in recent months. This means that potential homebuyers may have more options to choose from when looking for a home. The number of new homes available on the market also increased in February, which means that potential homebuyers have more options to choose from.
• Slower price growth: Although home prices are still rising, the pace of growth has slowed down in some areas. This could make it easier for homebuyers to afford a home in certain markets.
• Easier negotiations: In a slower housing market, sellers may be more willing to negotiate on the price of their home or other terms of the sale. This could give homebuyers more bargaining power and help them get a better deal on a home.
• Lower prices: While the median price of a new home rose slightly from a year ago, the increased inventory could lead to greater competition among sellers, potentially driving down prices.
• Leading indicator: New home sales are considered a leading indicator for the housing market, meaning that an increase in new home sales could signal a positive trend for the housing market overall. This could be good news for potential homebuyers who may be hesitant to enter the market during a downturn.

Looking ahead to 2024, the US housing market, key trends and factors will shape the real estate landscape. These include the influence of interest and mortgage rates on buyer demand, the persistent challenge of limited housing inventory, steady growth in home prices, and concerns over affordability for potential buyers.

Generational shifts and the impact of remote work will also shape housing preferences, while government policies and regional variations will contribute to market dynamics. Overall, staying informed and adaptable will be crucial for navigating the evolving housing landscape in the coming months.

One key factor to watch is the potential impact of policy considerations, such as a temporary reduction in capital gains tax on investment property sales. If implemented, this measure could stimulate the market by increasing housing inventory, sales, and overall economic growth. Policymakers will need to carefully evaluate and balance the potential benefits of such measures against any unintended consequences.

Addressing the challenges of housing inventory and supply levels will be critical moving forward. Collaborative efforts among policymakers, industry professionals, and stakeholders will be necessary to find sustainable solutions. Encouraging an increase in housing inventory will help meet the demand from prospective buyers and potentially stabilize prices.

Localized data and insights will continue to be essential for making informed decisions. Consulting with local associations of REALTORS® and utilizing data from local multiple listing services (MLS) can provide accurate and detailed information specific to particular areas. This will help individuals and businesses navigate market conditions effectively and make strategic choices.

Monitoring forthcoming releases of key indicators, such as the Pending Home Sales Index and Existing-Home Sales data, will offer valuable insights into the evolving trends and dynamics of the real estate market. Staying informed and adaptable to changing conditions will be crucial for making well-informed decisions and seizing opportunities in this dynamic landscape.

While challenges persist, the real estate market also presents opportunities for growth and investment. With careful analysis of market conditions, consideration of policy measures, and collaboration among industry stakeholders, the real estate sector can strive toward a more balanced and sustainable future in 2024.