The housing market is showing signs of a shift, with improved affordability and increased inventory creating a more favorable environment for buyers. Let's delve into the recent trends and explore the potential for a hot spring market in 2025.
Affordability on the Rise
Despite hitting record lows in June 2024, affordability began improving in August. While home prices reached a record high in June, the monthly cost of financing a median-priced home also peaked, primarily due to high mortgage rates. However, a combination of factors, including declining inflation and anticipation of Fed rate cuts, led to a decrease in mortgage rates during July and August. This resulted in a significant improvement in affordability, with monthly mortgage payments becoming approximately 5% cheaper over the past two months.
Sales and Inventory Trends
While sales and inventory typically decline in the second half of the year, this historical trend has been disrupted in recent years. Sales have been historically low since January 2023, and despite depressed new listings, inventory has grown to its highest level since 2020. This means buyers have more choices than they've had in years.
The combination of higher supply, lower prices, and lower interest rates has led to a slight increase in sales month-over-month, albeit modest at 1.3%. However, with improving conditions and historically low sales levels, further increases are anticipated.
Looking Ahead to a Hot Spring Market
The anticipated Fed rate cuts, likely beginning with the mid-September meeting, are expected to continue throughout the year, further boosting affordability. This, coupled with the current high inventory levels and seasonally lower home prices, sets the stage for a potentially hot spring market in 2025. While spring is still a ways off, the current market conditions are already favoring buyers, offering a greater selection of properties and potentially more favorable negotiation opportunities.
The housing market is experiencing a shift towards a more favorable environment for buyers. Improved affordability, increased inventory, and anticipated rate cuts create a promising outlook for the remainder of 2024 and into 2025. If you're considering buying a home, now is a great time to explore your options and take advantage of the current market conditions. Consult with a real estate professional to gain personalized insights, navigate the market effectively, and prepare for a potentially hot spring market in 2025.
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