Published Date 8/26/2024
The U.S. housing market has been on a wild ride in 2024, with elevated mortgage rates and sky-high home prices pushing many potential buyers to the sidelines.
Homeowners, reluctant to give up their pandemic-era low mortgage rates, have been hesitant to list their properties, creating a perfect storm of market stagnation. CNN's Elisabeth Buchwald and Bryan Mena report, however, that a glimmer of hope has emerged as the Federal Reserve hints at potential interest rate cuts. This anticipation has breathed new life into the market, with mortgage rates recently plunging to their lowest levels in over a year.
"An influx of homeowners rushed to refinance their mortgages," Buchwald and Mena add, highlighting the immediate impact of falling rates.
The good news doesn't stop there. New home sales surged by more than 10% last month, reaching their highest level since May 2024. Existing home sales also saw a modest increase, breaking a four-month streak of decline.
But for many aspiring homeowners, the situation remains bleak. Mena notes, "Existing home prices were 4.2% higher in July compared to a year ago after rising for the 13th consecutive month." This persistent price growth has significantly raised the bar for homeownership, with the required household income for a median-priced single-family home nearly doubling in just three years.
"Affordability conditions are unlikely to improve drastically," Buchwald quotes Wells Fargo economists, who cite the ongoing mismatch between housing supply and demand as a major factor.
While lower mortgage rates offer some relief, experts caution that it may take time for rates to drop enough to make a meaningful difference. The Fed's future actions will play a crucial role, as Buchwald explains: "The Fed doesn't directly set mortgage rates, but its actions do influence them through the benchmark 10-year US Treasury yield."
Mortgage Bankers Association’s chief economist Mike Fratantoni predicts a gradual decline in mortgage rates, telling Mena, "Our forecast continues to look for mortgage rates to drift down closer to 6% over the next 12 months or so."
Even with potentially lower rates on the horizon, Americans still face historically high home prices. The chronic lack of housing inventory remains a key challenge, although there have been some positive developments. Mena reports, "Total housing inventory at the end of July was 1.33 million units... up 19.8% from a year ago."
As the housing crisis persists, political figures are proposing solutions. Vice President Kamala Harris has called for the construction of 3 million new housing units, while former President Donald Trump has suggested using federal land to address the shortage.
However, Buchwald and Mena conclude that there's no quick fix for America's housing affordability crisis. Experts agree that a solution will require time and concerted effort from all stakeholders. As the rollercoaster ride continues, prospective homeowners and industry watchers alike will be keeping a close eye on the market's twists and turns.
CNN, TBWS
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