Mortgage rates hold steady to start 2024.
Is an uptick in the housing market on its way?

The number of existing-home transactions nationwide declined last year, but prices went up in most metro areas, according to data from the National Association of Realtors.


The nation’s for-sale housing market is off to a mixed start this year after a 2023 that proved largely challenging for homebuyers.


Existing-home sales ended 2023 down about 19% from the prior year, according to data from the National Association of Realtors. While the number of transactions declined, prices rose in most metro areas through the end of the year, and that trend appears to be holding up early into 2024.


In fact, single-family existing-home sale prices rose in 86% of metro areas measured by the NAR — or 189 of 221 — in the fourth quarter. That’s up from 82% in the third quarter.


At the end of 2023, the national median single-family existing-home price was up 3.5% from the year prior, to $391,700.

Lawrence Yun, chief economist at the NAR, said he believes the worst in inventory and sluggish home sales is done and that 2024 will largely be a year of recovery.


“Price increases have become much more moderate than the past two years,” Yun said. “That’s a good thing. Income growth is catching up with home prices.”


The South saw the largest share of single-family home sales in the final quarter of 2023, at 45%, with an annual price appreciation of 3.2%. Prices rose more significantly in other parts of the country: 7.3% in the Northeast, 4.7% in the Midwest and 4.2% in the West.


Among the metro areas tracked by the NAR, a number posted median price gains of nearly 15% between the end of 2022 and 2023. Among them: Dayton, Ohio (19.9%); Kingsport-Bristol-Bristol, Tennessee-Virginia (19.2%); Fond du Lac, Wisconsin (18.6%); Trenton, New Jersey (17.3%); Salinas, California (17.1%); Newark, New Jersey-Pennsylvania (16.7%); Anniston-Oxford, Alabama (15.7%); Bloomington, Illinois (15.4%); Johnson City, Tennessee (15.2%); and Anaheim-Santa Ana-Irvine, California (14.8%).


There was a notable inventory bright spot in the 2023 housing market. More than 660,000 newly built homes sold last year, a 4.2% increase from 2022, according to Zillow Group Inc. (Nasdaq: ZG) and the U.S. Census Bureau. Homebuilders have been able to offer concessions like mortgage-rate buydowns to lure buyers who may otherwise be locked out of the housing market.


Builders also have started to build smaller, more moderately priced homes, Yun said, making that segment of the market more competitive to buyers. And, he added, it’s likely builders will continue to offer incentives for new homes hitting the market this year.

“Builders made good profits last year, even with the concessions,” Yun said. “(It) may be a marketing trick where the price is higher but they’re giving the perception that they’re giving a better deal with the buydown.”


Mortgage rates are closely watched


Sales activity at the end of 2023 might’ve picked up at least in part because of mortgage-rate declines in the fourth quarter.


The 30-year fixed rate went from 7.79% to 6.61% in the final three months of the year. That’s down from 8% and higher earlier in 2023. The rate was 6.64% for the week ended Feb. 8, essentially unchanged from the 6.63% the week prior and 6.62% at the start of 2024, according to Freddie Mac data.


For the four-week period that ended Feb. 4, the median U.S. sales price was up 5.4% year over year, the biggest increase in more than a year, according to Redfin Corp. (Nasdaq: RDFN). Meanwhile, pending home sales are down 8% from the same period a year prior.

The Mortgage Bankers Association’s latest weekly Market Composite Index — a measure of mortgage loan application volume — increased 3.7% on a seasonally adjusted basis the week ended Feb. 7 compared to a week earlier. The seasonally adjusted Purchase Index decreased 1% from one week earlier.


“Mortgage rates have stayed close to where they started the year, despite swings in Treasury yields, because of slowing inflation offset by stronger-than-expected readings on the job market,” said Joel Kan, vice president and deputy chief economist at the MBA, in a statement. “Purchase activity has been strong to start 2024 compared to the final quarter of 2023. However, activity is still weaker than a year ago because of low housing supply.”


Yun said there may be room for mortgage rates to go down further this year but it likely won’t be by much. All eyes are on what the Federal Reserve will do with interest rates at its upcoming meetings — but, Yun said, downward rate movement that’s recently occurred is in anticipation of rate cuts from the Fed later this year.


“If there are more (than expected) cuts, mortgage rates could go down” further, Yun said, adding he’s optimistic inflation will continue to go down, and that might provide an opportunity for the Fed to cut rates more than what’s currently expected.


Because of the decline in mortgage rates seen in the final quarter of 2023, housing affordability improved somewhat compared to the prior quarter, according to the NAR. The monthly mortgage payment on a typical existing single-family home with a 20% down payment was $2,163 at the end of 2023, down 1.2% from the third quarter but a 10% increase from the end of 2022.

Ashley Fahey
By Ashley Fahey – Editor, The National Observer: Real Estate Edition, The Business Journals