If you are a regular follower of our real estate market updates—all looking to answer the question, “Can our prospects sell their homes at a reasonable value?”—you’ve seen that home resale values have stayed strong the past few years despite interest rates being much higher than in the previous several years. Fortunately, this update shows more of the same, with one new point of interest (literally): Mortgage rates have dropped significantly since our last update in May.
Here are a few highlights from the October 2024 reports. If you’d like to refer back to any of our earlier recaps for more details, please see the in-depth analysis of six key performance indicators we originally published in February 2023, or explore the overall look back on 2023 we shared in February this year.
Median Home Resale Values
Median home resale values continue to be strong, with the September 2024 price of $409,000 being $11,600 higher than the same time in 2023. And while resale values have dropped since their peak of $432,900 this past June, it’s normal for values to fall a bit after the peak March through June resales period has passed.
The table below shows the median home resale values for the past five-plus years, with 2024 data shown in purple.
Months’ Supply of Homes
The months’ supply of homes for sale has been steadily increasing since late 2021. In September, the supply of homes currently on the market would take 4.3 months to sell based on the current rate of sales. This is an increase of a full month from September 2023, and about 2-1/2 months since the start of 2022.
For the past several years, we have shared that, from a historical perspective, the months’ supply of homes for sale has been pretty low, meaning that demand has been strong relative to supply. However, it has now moved into the low end of the more typical range (again, from a historical perspective) of four- to six-month’s supply. So that facet of the market is “normalizing.”
The impact of this, of course, is basic economics: The longer homes are on the market, the more pressure there can be on the sales price, so we will need to continue to monitor this facet of the market’s performance closely to see how the supply affects pricing as interest and mortgage rates continue to decline.
That said, in its monthly news release, the National Association of Realtors (NAR) reported that “… properties typically remained on the market for 28 days in September, up from 26 days in August and 21 days in September 2023.” So, the typical home is still selling quickly.
Annual Rate of Sales
While the months’ supply has increased, the 2024 annual rate of sales has not changed meaningfully from 2023. In fact, month-by-month the 2024 pace of sales has almost exactly mirrored 2023.
From a historical perspective, the number of sales continues to be very low, which continues to reflect a limited supply of homes. However, an increasing months’ supply coupled with a flat volume of sales indicates that more homes are being brought on the market for sale, which would be expected as interest rates begin to decline. This is borne out by the numbers, as the NAR reports that the total housing inventory at the end of September is up 23% from a year ago.
Interest Rates Are Coming Down…Sort of
After much anticipation—and several delays brought on by a stronger-performing economy than expected—the Federal Reserve finally started decreasing interest rates in September, lowering the federal funds rate by 0.5%. As expected, this had an effect on mortgage interest rates, but not exactly in the way we all might have thought.
In 2024, mortgage rates peaked at the beginning of May, hitting 7.22% for a 30-year mortgage. Rates then dropped steadily for the next several months in anticipation of a decrease in the federal funds rate, before taking a sharp turn down as the rate reduction was announced, hitting a low of 6.08% in late September. However, since then rates have started back up, hitting 6.54% as of October 24th. At that time, Freddie Mac reported that “The continued strength in the economy drove mortgage rates higher once again this week. Over the last few years, there has been a tension between the downbeat economic narrative and incoming economic data stronger than that narrative. This has led to higher-than-normal volatility in mortgage rates, despite a strengthening economy.”
Stay Tuned For Our Next Update
- Where is the market going, and what should we expect in 2025?
- Will more homeowners put their homes on the market now that there is hope that interest rates will continue to drop?
- How might a potential increase in supply affect home resale pricing?
- Will mortgage rates continue to go up, despite decreases in the federal funds rate?
Please stay tuned for our quarterly updates, as our crystal ball remains just a touch foggy.
