Are sellers finally giving in to the tumultuous US housing market pressures in 2024? A video from Reventure Consulting reports recent data from Realtor.com that suggests a significant shift, with the median list prices of houses witnessing a steep decline over the last six months, plummeting nearly 9% from their peak in June 2022.
Nationwide Downward Trend: A Market-Wide Phenomenon
This downward trend is not isolated but appears to be a nationwide phenomenon, with affordability concerns at the forefront. Cities such as Dallas, Austin, Tampa, and Cape Coral are experiencing a surge in housing inventory, pushing sellers to make substantial price cuts.
The housing market, it seems, is grappling with the consequences of its own unbridled growth.
At the close of 2023, the median list price for houses in America dipped to $410,000, still considerably higher than the pre-pandemic figure of $300,000 at the end of 2019. Despite the decline, these prices remain a challenge for most homebuyers, especially with mortgage rates hovering in the high 6% range, as reported by Mortgage News Daily.
Although down from the peak of 8% in October, these rates continue to stifle affordability, contributing to a significant drop in homebuyer demand.
Redfin’s Homebuyer Demand Index: A Sobering Reality Check
Redfin’s homebuyer demand index paints a sobering picture for 2024, showing a 9% year-over-year decrease and a staggering 40% drop from 2022 levels. The market seems underwhelming as prospective buyers hesitate to enter a landscape of decreasing affordability.
This fatigue among potential buyers is evident in the dwindling mortgage applications and home searches on Google. Google Trends data reveals that the search interest in “homes for sale” is at an index level of 47, nearly half of the levels witnessed in the peak pandemic home-buying boom of 2021.
However, the key to reviving the market might lie in the strategies employed by homebuilders. While overall buyer demand remains muted, new home sales for builders have rebounded to pre-pandemic levels.
This resurgence can be attributed to builders aggressively slashing prices and offering generous mortgage rate reductions. The average sale price for newly built houses has dropped by approximately 15% from its peak, providing valuable insights into the market’s potential trajectory.
The Existing Home Sales Issue: City-Specific Trends
Yet, builders represent only a fraction of the housing market, accounting for about 15% of home sales. The real litmus test lies in existing home sales, where sellers must substantially capitulate and lower median list prices. This, however, remains a city-specific trend, with some areas still displaying seller optimism, leading to overvalued prices.
The situation in Florida is particularly intriguing as inventory levels skyrocket in cities like Cape Coral and Tampa. With year-over-year inventory growth ranging from 50% to 100%, sellers in Florida may soon find themselves compelled to slash prices due to a burgeoning oversupply.
In the YouTube comments, people report their own experiences with plummeting real estate prices: “I am a licensed loan officer in AZ and I am adding PA. My client and I looked at some houses today on zillow. One house was listed for $399k. The property was originally listed in March 2023 for 649k. Approximately a 45% decrease in less than one year. Another property listed three months ago has been cut by 30k. Both properties are not under contract. I’ve asked my client to wait until the end of the first quarter but he wants to jump. I believe they were air bnb’s on an investor owned them after analyzing the price history.“
Another commenter added some interesting info: “Here’s something we learned about the Tulsa housing market. The soil here has a lot of clay so there are many areas where the homes have foundation issues and they install piers to correct the problem. It’s expensive and dealing with structural issues when buying a house is not something we’re interested in signing up for, especially at these prices. No thanks.”
Still, most agree that “Prices need to drop a lot before people start buying again.”
The Path Ahead for Prospective Buyers and Investors
As the housing market navigates these shifts, one critical factor to watch is the behavior of homeowners with locked-in low mortgage rates. With 89% of mortgage holders enjoying rates below 6%, the reluctance to sell has resulted in lower inventory, further fueling price resilience.
The coming months are crucial for prospective homebuyers and investors. Observing trends in inventory levels, overvaluation rates, and price cut percentages can offer valuable insights.
In 2024, the market appears to be at a crossroads, and only time will reveal whether sellers’ capitulation leads to a more balanced and affordable housing landscape.
Will the ongoing price declines prompt a resurgence in buyer interest, or is the fatigue among potential homeowners a sign of deeper market challenges? As builders lead the way in slashing prices, can their strategies offer a blueprint for existing home sellers, or are these two segments of the market destined for different fates?
With Florida’s market in turmoil, how will the surging inventory and overvaluation impact the overall trajectory of the national housing market, and what lessons can other regions learn from this unfolding scenario?