Housing demand is reaching its seasonal peak amid some promising signs for the spring homebuying market.
According to the National Association of Realtors, existing home sales were up 9.5% month over month in February and prices were up 5.7% year over year, marking a strong start to the 2024 housing market. Inventory was also up in February 2024 to 2.9 months from 2.6 months the year prior, so there’s hope that this year might be less frustrating for homebuyers, despite stubbornly high interest rates.
The Federal Reserve announced that its rate hike program may soon end, as mortgage interest rates fell at the end of March for the second consecutive week.
What can you expect for the busiest time of year for the real estate market? Probably a heady mix of drama and frustration, as both buyers and sellers take advantage of warmer weather and longer days to scour local markets for their next homes. Here are the top things to keep in mind as you’re shopping for your new home.
[READ: How Long Does it Take to Find a House?]
1. Affordable Homes Are Still Out There, But It’s Competitive
Affordability is on everybody’s mind, with mortgage interest rates still hovering around 7% and the median home sales price at $384,500, a 5.7% increase year over year. There’s a very real question about just how much further buyers can bend before they break. Experts say that affordable homes are out there, but in many markets you may face stiff competition.
“Expect continuing multiple offers on affordable homes,” says Lawrence Yun, chief economist and senior vice president of research at the National Association of Realtors. “Job additions are creating more housing demand, but the supply of affordably priced homes is still limited.”
If your job is mobile, or you work fully remote, you may find it much easier and more affordable to buy outside your current market.
“The relative abundance of options in the South should make that area a bit easier to buy in than in previous years,” says Danielle Hale, chief economist at Realtor.com. “While the Northeast and Midwest offer relative affordability of homes, that feature has been drawing buyers in and keeping these markets relatively competitive.”
According to Realtor.com research, nationally, the supply of homes priced between $200,000 and $350,000 increased 20.6% year-over-year in February 2024, versus a 14.8% increase in overall housing inventory for sale. The markets with the most relatively affordable homes for sale include Orlando, Miami and Tampa, but there’s been a significant increase in these homes across the South, Midwest and Texas.
[Read: The Buyer and Seller Guide to a Real Estate Bidding War.]
2. New Construction Is a Viable Option for All Buyers
With new construction homes coming in at a median sales price of $400,500 for February, according to the U.S. Census Bureau, the cost to buy new is only a little more than 4% higher than an existing home.
“With more inventory available, the ability to buy down mortgage rates and attractive incentives such as free refinancing within three years of purchase, new construction homes are becoming increasingly appealing,” says Brandon Lwowski, senior director of research at HouseCanary, an AI-powered residential real estate data and analytics firm based in San Antonio. “As existing home inventory remains tight, it’s expected that more future homeowners will gravitate towards the new construction market.”
Sales of new construction homes are up, but don’t let that deter you. An increase in builder confidence means more new homes will be ready to go sooner rather than later.
“Some reports say that nearly 32% of homes sold last quarter were new construction,” says Amy Lessinger, president at RE/Max in Denver. “The Commerce Department also said, ahead of what tends to be a busy season for the market, that new-home construction soared in February. Overall, an increase in new construction and growing builder confidence is indicative of more options for buyers this year.”
According to Yun, one-third of current listings are new homes right now. Usually, it’s closer to 10%, so you may find yourself in a new home this spring.
3. Despite Rate Lock-Ins, Life Changes Push Sales
Even if you’re already in the market and it feels bleak, keep in mind that life is continually happening to homeowners. Circumstances they might not have expected are turning them into home sellers, even if they’ve been trying to stay on the sidelines.
“Some homeowners who have delayed listing in the past couple of years, despite life-changing circumstances, can no longer delay,” says Yun. “There were 7 million newborn babies over the past two years whose parents may need to list their starter home and trade up. There were 7 million people who hit the retirement age of 65 who may want to trade down. Marriage and divorce lead to more listings. There were also around 50 million job switches, which means different commuting patterns that may require a different residence. Expect more supply.”
With this increased supply from homeowners who absolutely must sell, there’s another unexpected benefit: the potential to assume their mortgages. An assumption allows you to essentially take over the seller’s mortgage — and their interest rate. This won’t be possible on all properties, but it’s certainly a bonus to watch out for.
“Homebuyers who are looking for ways to maximize their housing budget and are willing to put in some effort to secure a loan may consider whether an assumable mortgage is something to look for,” says Hale. “A recent Realtor.com analysis showed that in markets where they are most common, sellers advertise assumable mortgages on 1% to 3% of homes for sale.”
Mortgage assumption can be one way for buyers to save money while interest rates are high, and it can help sellers stand apart from the competition by offering a more affordable home loan.
[What Kind of House Can You Buy for $1,500 a Month?]
4. Remember the Seller Is Still Leading Negotiations
With only 2.9 months of inventory currently available, remember that it’s still a seller’s market. That means that no matter how badly you want a particular home, no matter how much you think your local market has cooled, the seller can easily walk away from your offer because they know another will be along any moment.
“In some competitive markets, buyers should be proactive in making their offer stand out,” says Lessinger. “Rather than starting with a low bid, it’s essential to present a strong initial offer to avoid losing out. Sellers often prioritize offers with fewer contingencies and more flexible terms, such as accommodating the seller’s preferred move-in date.”
She also stresses the importance of having a trusted buyer’s agent in your negotiations. They can advise you on how to craft the most effective offer for your financial goals, and advocate on your behalf in a multiple offer situation.
A Regional Breakdown
Among the four major U.S. regions, monthly sales in February jumped in the West, South and Midwest, and were unchanged in the Northeast. Year-over-year, sales declined in all regions. Here’s a look at each market.
Northeast: At 480,000 units, existing home sales in the Northeast were identical to January but down 7.7% from February 2023. It wasthe fourth consecutive month that home sales in the Northeast registered 480,000 units. The median price in the Northeast was $420,600, up 11.5% from one year ago.
Midwest: In the Midwest, existing home sales jumped 8.4% from January to an annual rate of 1.03 million in February, down 3.7% from the previous year. The median price in the Midwest was $277,600, up 6.8% from February 2023.
South: Existing home sales in the South leapt 9.8% from January to an annual rate of 2.02 million in February, down 2.9% from one year earlier. The median price in the South was $354,200, up 4.1% from last year.
West: In the West, existing home sales skyrocketed 16.4% from a month ago to an annual rate of 850,000 in February, a decline of 1.2% from 2023. The median price in the West was $593,000, up 9.1% from February 2023.
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How to Navigate the 2024 Spring Homebuying Season originally appeared on usnews.com
