The housing market saw significant changes last month, which made many people ponder if May 2024 would be a good time to buy a home. To find out, let's dig into the data.
Favorable Signs for May 2024 Homebuyers
- Potentially Peak Mortgage Rates: Experts predict mortgage rates might hit their annual peak in May. Locking in a rate now could shield you from potential future hikes.
- Competition Could Ease: While buyer demand remains strong, there are signs it might cool slightly compared to the scorching market of the past year. This translates to less competition for properties, potentially increasing your negotiation power.
- First-Time Homebuyer Advantages: Programs like the FHFA First-Time Home Buyer Mortgage Rate Discount can offer significant interest rate reductions, making homeownership more accessible.
Housing Supply and Demand Dynamics
The housing market in April 2024 saw significant changes in both housing supply and demand. According to Realtor.com, there was a 30.4% increase in the number of homes actively for sale compared to the previous year, marking the sixth consecutive month of growth. Moreover, the total number of unsold homes, including those under contract, surged by 20.0%.
Home sellers were notably more active, with 12.2% more homes newly listed compared to the previous year. However, despite the increase in supply, the median price of homes remained stable at $430,000.
Market Outlook
While the median list price didn't increase, there were affordability concerns due to a rise in mortgage rates. This increase was fueled by stronger-than-expected inflation and employment readings in March and April.
One notable trend was the increase in availability of more affordable homes, particularly in the South. This led to promising opportunities for buyers, with the time homes spend on the market remaining below pre-pandemic levels.
Regional Analysis
The South emerged as a leader in affordable inventory growth, with availability of homes in the $200,000 to $350,000 range surging by 41.0% compared to the previous year. Additionally, the South saw the highest increase in newly listed homes at 19.7%.
However, not all regions experienced the same trends. While the South saw a rise in inventory, homes spent two days more on the market compared to the previous year. Conversely, the Midwest, Northeast, and West witnessed homes spending less time on the market.
Price Trends and Affordability
Despite stability in the median list price, the price per square foot continued to rise, driven by the availability of smaller, affordable homes. Higher mortgage rates increased the monthly cost of financing, posing challenges for prospective buyers.
While some markets experienced a decline in median list prices, rising mortgage rates offset these decreases in many areas, leading to an overall increase in the required household income to purchase a home.
Bottom Line: Given the swings in housing supply, demand, and affordability, the choice to buy a home in May 2024 is influenced by a variety of factors, including area dynamics and personal financial situations. Even though there are plenty of opportunities, potential buyers should carefully consider the state of the market and consult an expert in order to make well-informed decisions.
Factors to Consider Before Diving In
- Market Specificity: National trends provide a general outlook, but zoom in on your local market. Research inventory levels, average sales prices, and projected trends to understand your specific buying environment.
- Long-Term Commitment: Buying a house is a significant financial decision. Ensure your financial situation allows for a long-term commitment, considering factors like potential future maintenance costs and property taxes.
- Beyond Interest Rates: Don't solely focus on interest rates. Consider the overall cost of ownership, including down payment, closing costs, homeowner's insurance, and potential renovations.
- Wait and See: If unsure about the market's direction, consider waiting a few months to see if mortgage rates stabilize or inventory levels rise.
- Continue Saving: Utilize the waiting period to boost your down payment, potentially making you a more attractive buyer and reducing your reliance on high-interest loans.
