Broker Check

Housing Heats Back Up

March 28, 2024

The February data came out recently, and housing is seemingly picking up quickly once again. 

In February, home sales rallied 9.5% from January. And although year over year sales are still down 3.3%, February posted the highest monthly gain since this same time last year. 

So, what is potentially happening here? 

There are a ton of different factors that go into the housing market, but one thing we hear all the time is, mortgage rates. Well, mortgage rates are slightly higher now than they were last year. So mortgage rates don’t tell the whole story here. 

What does tell that story is two separate factors, an increase of inventory and potential impatience from those on the sidelines. 

In addition to low mortgage rates, the lack of housing supply was a massive factor when taking a look into why housing prices soared in 2021 and 2022. There were far more buyers than sellers, so the sellers could pick their price point knowing there was a really good chance of finding a buyer, and many people did exactly that. Tag that long with the lowest mortgage rates we have ever seen, and housing prices were racing higher. 

Fast forward to today in 2024, and housing prices are still up, roughly 5.7% year over year. This is also due to continuing demand even with higher interest rates. 

But there was one significant change that has started taking place. Inventory is up 5.9% year over year, so there are more houses on the market for buyers. This is due to two things, one being that we are starting to finally build more homes, but two, some people need to start selling. 

For a while you had people unwilling to sell because they were locked into mortgage rates between 2-5%, far lower than today’s rate of 7%. So moving felt like a loss because your new mortgage would be much more expensive than the one you have today.

But, this can’t last forever. At some point, people have to move whether they want to or not. Whether it is a change of job, outgrowing the current home, or some other reason, people have to move. And for those people, waiting out interest rates isn’t a possibility. As we continue to have that, inventory may still continue to creep up to help the overall housing market. 

Additionally, buyers are becoming impatient. 

We have been in a rising interest rate environment since March 2022. And while it looks like we may be done raising rates, it doesn’t look like they will come down anywhere near as fast as they went up, and odds are we won’t see those 2021 interest rates for a long long time if ever. So if you’re a buyer, your patience is waning. You have more cash than ever, and your waiting game for interest rates isn’t working, so you start to buy. You can always refinance later. 

Ultimately, I’m not surprised to see the jump in the housing market sales. I also wouldn’t be surprised if we continue to see this number grow, maybe not 9.5% at a time, but steady growth. 

At the end of the day, we are building, people need to move, and buyers are becoming impatient. These factors combine to typically lead to the growth we are starting to see again.