Discover the latest trends in the housing market and gain insight into how they could impact your business.

Mortgage lenders can help homebuyers navigate housing trends and persistent challenges in the housing market.

Homebuyers continue to face big obstacles in the form of higher mortgage rates and a sparse inventory of homes on the market. Yet buyers may see some relief ahead on both fronts in the coming year.

Obvious challenges are weighing on sales activity. “The word that comes to mind is frustration. There is frustration in all segments of the process,” says Pete Schram, executive vice president, national retail sales executive, West Region at U.S. Bank.

First-time homebuyers are struggling with affordability due to high real estate prices, while move-up buyers are reluctant to give up an existing low mortgage rate even if they want or need to purchase a new home. All buyers are in the same boat of dealing with a highly competitive marketplace that favors the seller, he adds.

However, the latest industry data is providing a glimmer of hope that the housing market may be moving off the bottom. Some industry forecasts are predicting higher home sales, increasing new home construction and, potentially, lower mortgage rates in the second half of the year. Buyers also are finding financing solutions that are helping them bridge the gap on higher costs.

Home sales are trending higher in 2024 and 2025.

U.S. home sales are down on historic highs but by no means out. According to Fannie Mae’s March Housing Forecast, the number of total 2024 home sales is expected to be 4.91 million – an increase of about 2.3% on last year – and will rise another 9.98% to 5.4 million in 2025.1

Single-family home mortgages are expected to grow by 16.6% from 2024 to 2025.

While higher interest rates are creating some pain points in the housing market, they have not frozen mortgage lending. Fannie Mae predicts that mortgage originations specific to single-family home purchases will total $1.76 trillion this year and inch higher to $2.18 trillion in 2025.1

Successfully navigating the current marketplace requires working with experienced and knowledgeable mortgage lenders who understand current market dynamics and can provide the financing options and analysis necessary to meet a client’s homebuying objectives.

Outlook on affordability remains mixed.

Affordability remains a big hurdle, particularly for first-time homebuyers. To the positive, buyers could see some improvement in mortgage rates later this year, as the Fed has indicated that rate cuts are still on the table for 2024. As of mid-March, the national average 30-year mortgage rate was hovering just above 7%. Fannie Mae is forecasting that the 30-year fixed rate will drop to 6.4% by the end of 2024 and 6.0% in 2025.1

At the same time, buyers are not getting a break on home prices. According to the National Association of Realtors (NAR), the median existing-home sales price climbed for the eighth consecutive month to $384,500 in February, which represents a 5.7% year-over-year price gain.2

Beware trying to time the market.

A common question buyers wrestle with is whether now is the right time to buy. Timing the market to get the optimal value is incredibly difficult, notes Schram. Even if mortgage rates do fall in the second half of the year, it’s difficult to predict whether home prices will increase, decrease or stay the same.

“You can always refinance your interest rate. You can’t refinance your purchase price,” he says.

Supply of for-sale increase is expected to increase.

The high-rate environment is discouraging some owners from selling, because they don’t want to give up an existing lower-rate mortgage. Less turnover is therefore contributing to what has been a persistent under supply of for-sale homes.

According to NAR, the current home inventory on the market as of January represents a 2.9-month supply, which is below the five to six months considered to be a healthy level for a balanced market but up from 2.6 months February 2023.2

New data suggests that there is at least some relief ahead in terms of increased inventory. According to a new report from Redfin, new listings of U.S. homes for sale rose 13% year over year during the four weeks ending February 25, the biggest increase in nearly three years.3

Builders also are gaining traction. Fannie Mae is forecasting that single-family housing starts will increase by 7.4% in 2024 to an annual total of 1.01 million new homes and grow by another 3.8% in 2025 to 1.05 million.1

“Some buyers feel that, if they’re going to pay top dollar, they don’t want to settle for a house that is older or isn’t exactly what they want,” says Schram. U.S. Bank’s lending team has seen an uptick in interest for its construction loans, particularly its long-term rate lock program. Regardless of what happens with interest rates during the build, the buyer has a long-term rate lock in place along with a one-time option to be able to float down to market rate. “The long-term rate lock program helps buyers sleep better at night during construction, and it also gives builders peace of mind as they know their buyer is still going to qualify for their mortgage financing even if interest rates go up during the build,” he adds.

Data highlights market turbulence.

Although forecasts are trending positive, there is still some near-term turbulence that is showing up in market data.

Highlights from the most recent NAR report2 include:

  • Existing-home sales expanded 9.5% in February to a seasonally adjusted annual rate of 4.38 million. However, on a year-over-year basis, sales declined 3.3%.
  • Total housing inventory registered at the end of February was 1.07 million units, up 5.9% from January and 10.3% from one year ago (970,000).
  • The Pending Home Sales Index (PHSI) – a forward-looking indicator of home sales based on contract signings – decreased to 74.3 in January, down 4.9% from December 2023. Year-over-year, pending transactions were down 8.8%. (An index of 100 is equal to the level of contract activity in 2001.)

Adapt to a new normal in the housing market.

It’s important to look at housing market trends in the context of the broader economy. Despite recent weakness in single-family home sales, many homebuyers are in a strong financial position. According to the Bureau of Labor Statistics, the national unemployment rate remains near historic lows at 3.9% in February, while annual wage growth continues to hover near 4.3%.4

History clearly shows that there is a path to homeownership across all market cycles and in all interest rate environments. In the current environment, loan officers are educating homebuyers on programs and solutions that can help to bridge the gap on affordability. For first-time homebuyers in particular, there is more focus on state programs that offer subsidized interest rates or downpayment assistance programs.

“There are so many programs out there that consumers are just not aware of, and our team is really working to get that education piece out there as we interact with clients,” says Schram.

Working with a knowledgeable mortgage lender can help homebuyers understand the various mortgage options available to them that include conventional loans and various government guarantee home loan products, such as those backed by the Federal Housing Administration (FHA), United States Department of Agriculture (USDA) and Veterans Affairs (VA). Loan officers also work closely with homebuyers and their realtors on pre-approvals and financial analysis to show how different financial scenarios can impact mortgage costs and buying power.

Encouraging your clients to engage with a U.S. Bank mortgage loan officer early in the process, regardless of real estate market conditions, can help them understand their financial options, as well as set realistic goals and a budget.

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Disclosures

Loan approval is subject to credit approval and program guidelines. Not all loan programs are available in all states for all loan amounts. Interest rate and program terms are subject to change without notice. Mortgage, Home Equity and Credit products are offered through U.S. Bank National Association. Deposit products are offered through U.S. Bank National Association. Member FDIC.

This is not a consumer credit advertisement and is intended for homebuilder and real estate agent use only. This information is provided to assist homebuilders and real estate agents and is not a consumer credit advertisement as defined by Regulation Z.

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  1. Fannie Mae. “Economic & Housing Outlook: Economic Developments – March 2024.” Accessed April 8, 2024. https://www.fanniemae.com/research-and-insights/forecast/economic-developments-march-2024

  2. Copyright ©2024 “Existing-home sales vaulted 9.5% in February, largest monthly increase in a year.” National Association of Realtors, March 21, 2024. Accessed April 8, 2024. https://www.nar.realtor/newsroom/existing-home-sales-vaulted-9-5-in-february-largest-monthly-increase-in-a-year

  3. Applewhaite, K. (2024, February 28). “New Listings Post Biggest Uptick in Nearly 3 Years, But Buyers Show Restraint as Rates Rise.” Redfin. Accessed April 8, 2024. https://investors.redfin.com/news-events/press-releases/detail/1058/redfin-report-new-listings-post-biggest-uptick-in-nearly-3

  4. U.S. Bureau of Labor Statistics. (2024, March 8). Employment Situation Summary. https://www.bls.gov/news.release/empsit.nr0.htm

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