May 2024 Real Estate Market Overview

The real estate market going into the late spring has proved to be somewhat disappointing. While February initially saw a surge of buying, as tends to happen when the spring arrives, those numbers declined in March, and remain suppressed despite higher available housing inventory. One of the biggest issues is the fact that interest rates remain high, keeping many current homeowners locked into their current mortgages and pricing out many prospective buyers due to a lack of affordable housing options.

Disappointing Spring Sales in March and April

Despite a promising start in February, March saw comparatively disappointing home sales figures. Sales dropped approximately 4.3% between February and March, with April seeming set to follow suit. This also demonstrated disappointing numbers year over year, with sales dipping about 3.7% compared to the same time last year.

Housing Inventory on the Rise

These issues have arisen despite the fact that housing inventory has finally started to rise to meet existing demand. For years, housing construction has been limited by supply constraints, but contracts for new housing have picked up speed. In theory, this should help to alleviate market pressures caused by limited inventory, but that has yet to show itself in sales data.

Demand Hindered By High Interest Rates

One of the persistent issues is that demand for new housing has been hampered by high interest rates. Interest rates have hovered just below 7% since late 2023, and though it briefly seemed like it was dipping lower, it has since stabilized. While it is a good thing that interest rates are not rising, they are still quite high compared to what they were just a few years ago, with many current homeowners refusing to buy a home that will cost them that much more in interest payments.

Affordability Remains a Serious Issue

High interest rates have also contributed to persistent affordability issues that have priced out many prospective home buyers. While high home prices may be good for existing homeowners who benefit from high equity in their homes, it also means that many people who want to buy a home simply cannot. This will continue to suppress demand until interest rates fall significantly, or home prices generally start to fall into line with what consumers can actually afford.