Early 2024 Sees Boost in New Home Sales Thanks to Stable Mortgage Rates

The housing market has started 2024 on a strong note with an increase in new home sales, as stable mortgage rates have spurred buyer interest in January. According to the latest data released by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau, sales of newly built, single-family homes rose by 1.5% to a seasonally adjusted annual rate of 661,000 units, compared to a revised December figure. This pace marks a 1.8% increase from the same period last year, reflecting a modest but steady upward trend in the housing market.

New home sales are counted at the moment a sales contract is signed or ahttps://www.census.gov/ deposit is accepted. These homes can range from not yet started, to under construction, to completed. The report adjusts for seasonal variations, projecting that if the current sales pace continues unabated, around 661,000 new homes would be sold over the next year.

In terms of inventory, the stock of new single-family homes in January was recorded at 456,000, up 3.9% from January last year. This level translates to an 8.3 months' supply at the current sales pace, which is somewhat above the six months' supply that is traditionally viewed as a marker of a balanced housing market.

The median sale price of new homes in January stood at $420,700, a 1.8% increase from December and a slight decrease of 2.6% from the previous year. Despite the general affordability challenges in the housing market, the proportion of new homes priced below the $300,000 entry-level mark has continued to shrink, comprising just 15% of all sales. Conversely, 34% of new homes were priced above $500,000, indicating a shift towards higher-end market dynamics, with the majority of homes falling in the $300,000 to $500,000 price range.

Regional variations in new home sales were also significant. On a year-over-year basis, the Northeast saw a rise of 4.9% in new home sales, while the West experienced a substantial increase of 57.0%. In contrast, sales in the Midwest declined by 4.1%, and the South saw a decrease of 13.5%.

The early 2024 data suggests a housing market that is adjusting to economic conditions, with stable mortgage rates providing a critical support for new home sales. While the market continues to deal with inventory issues and shifting affordability, the overall upward trend in new home sales offers a positive outlook for the U.S. housing sector as it navigates through the year.

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Single-Family Home Construction Sees Turnaround in Urban Markets, Multifamily Declines in Coastal Areas

The housing construction landscape is shifting, with recent data from the National Association of Home Builders (NAHB) indicating a gradual turnaround in single-family home construction, particularly in larger urban metro markets. The fourth quarter of 2023 saw a modest rebound in these areas, driven by moderating mortgage rates and a persistent shortage of existing homes on the market. This shift comes despite a backdrop of broad declines across various market segments earlier in the year.

According to the NAHB Home Building Geography Index (HBGI) for Q4 2023, the improvement in single-family construction was notable in smaller metro outlying counties, which experienced a growth rate of 0.4%. "While all urban, rural, metro, and county area single-family markets saw double-digit production declines in the third quarter, construction began to turn the corner in the final quarter of the year," explained NAHB Chairman Carl Harris. He attributes this positive trend to the easing of interest rates and a mortgage "lock-in" effect, where homeowners with low mortgage rates are hesitant to sell, thus reducing existing home inventory.

NAHB Chief Economist Robert Dietz also highlighted the recovery in single-family construction, contrasting it with the multifamily sector. "New multifamily building in large, metro suburban counties posted a negative growth rate of 20% in the fourth quarter, reflecting the tail end of an apartment building boom that reached its highest level in more than 50 years," Dietz said. This downturn in multifamily construction was most acute in large metro areas, whereas more rural and outlying areas showed stronger performance.

The HBGI, a quarterly measurement using county-level data on housing permits, shows that single-family home building market shares varied significantly across different types of metro and county areas in the fourth quarter:
- Large metro core counties: 16.0%
- Large metro suburban counties: 25.0%
- Large metro outlying counties: 9.6%
- Small metro core counties: 28.7%
- Small metro outlying areas: 10.0%
- Micro counties: 6.5%
- Non-metro/micro counties: 4.2%

In terms of geography, approximately 25% of single-family construction consistently occurs in U.S. coastal counties, with these areas accounting for about one-third of new multifamily building. The market share for coastal counties in single-family construction has remained remarkably steady since 2014, with a slight decrease in multifamily construction market share in coastal regions from 36.6% in 2014 to 30.3% in 2023.

This ongoing shift in multifamily building toward non-coastal areas, particularly since the Covid pandemic, reflects broader trends in housing demand and development, with many people moving away from dense urban centers to more spacious suburban and rural settings.

As we move into 2024, the housing construction industry appears poised for continued adaptation, responding to shifts in demographic preferences, economic conditions, and the availability of construction resources. The recovery in single-family home building, especially in metro areas, is a promising sign for potential homebuyers looking for new opportunities in a challenging market.

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Navigating the 2024 Housing Market: How Buyers Can Prepare for Imminent Rate Cuts

As 2024 dawned, there was a palpable sense of optimism among homebuyers and borrowers, fueled by falling inflation and the anticipation of subsequent interest rate cuts. While initial hopes were somewhat dashed by less-than-stellar inflation reports for December and January, the consensus remains that rate cuts could be on the horizon, possibly as early as May or June.

This prospect is particularly significant for homebuyers who faced soaring interest rates in 2023—the highest since 2000. As they eagerly await potential decreases in the benchmark interest rates, and subsequently mortgage rates, prospective buyers are advised to prepare strategically to navigate the expected influx of competition in a new rate environment.

One crucial step buyers can take right now is securing mortgage pre-approval. While not a guarantee of securing a property, pre-approval does signal to sellers that a buyer is serious and financially vetted, providing a distinct advantage especially before rates drop and the spring real estate market heats up. In the current unique mortgage climate, being pre-approved can offer a significant competitive edge.

Mortgage pre-approvals typically last for two to three months, which perfectly positions buyers to concentrate on finding the ideal property without the pressure of concurrently shopping for lenders. Keeping your credit score high during this period is essential; a dip can complicate the re-approval process and potentially worsen the terms on offer.

Maintaining a strong credit profile isn't just about ensuring easier pre-approval. A high credit score can also secure better terms and rates, reducing the overall cost of a mortgage. In contrast, a lower score might lead to more required documentation and slower approval processes, which could cost you a desired property.

Financial prudence extends to the size of the down payment. A 20% down payment not only eliminates the need for private mortgage insurance (PMI) but also strengthens a buyer's offer by showing substantial financial backing. In today's market where cash is king and contingencies can be deal-breakers, demonstrating financial readiness is crucial.

For those who need to sell their current home to finance a new purchase, consider listing your property sooner rather than later. This move reduces buying contingencies and enhances your appeal to sellers by showing readiness to proceed quickly.

While mortgage pre-approval doesn't ensure home buying success, it significantly enhances a buyer's profile in a competitive market. With rate cuts likely on the way this year, enhancing your buyer profile by obtaining pre-approval, maintaining a robust credit score, making a significant down payment, and minimizing contingencies is more critical than ever. These steps will not only position you favorably in the current market but also set you up for success when you find your ideal home in the future.

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Surprising Surge in Existing Home Sales Highlights Market Resilience

In a surprising turn of events, sales of existing homes in the U.S. jumped 9.5% in February from January, reaching 4.38 million units on a seasonally adjusted annualized basis. This significant increase, as reported by the National Association of Realtors (NAR), defied housing analysts' expectations of a slight drop, showcasing an unexpected resilience in the housing market.

Despite a year-over-year decrease of 3.3%, this February marked the largest monthly gain since the previous year, highlighting a robust recovery in certain regions. The West experienced the most dramatic increase with a 19.4% surge, followed closely by the South with a 16.4% rise. The Northeast, however, saw no change, indicating regional disparities in housing market dynamics.

Lawrence Yun, the chief economist at NAR, attributed this growth to an increase in housing supply which is beginning to meet the rising market demand fueled by steady population and job growth. "The actual timing of purchases will be determined by prevailing mortgage rates and wider inventory choices," Yun noted, pointing out the critical factors influencing future market trends.

Inventory levels also saw an uplift, with a 10.3% increase from last year, bringing the total to 1.07 million homes available for sale at the end of February. Despite this growth, the supply remains tight with just a 2.9-month supply at the current sales pace, underscoring the ongoing imbalance between supply and demand in the housing market.

The median home price continued its upward trajectory, increasing by 5.7% from last year to $384,500. This marks the eighth consecutive month of annual gains, fueled by high demand and competitive market conditions where 20% of homes sold above the listing price.

Interestingly, the rise in home sales did not translate to increased participation by first-time buyers, who represented only 26% of purchases, a decline from 28% in January and well below the historical norm of around 40%. The prevalence of all-cash purchases, which increased to 33% from 28% the previous year, suggests a significant influence of wealthier consumers and possibly those relocating from more expensive states like California to more affordable markets such as Florida or Georgia.

Yun also speculated that factors like the stock market's performance and the acceptance of higher mortgage rates as a 'new normal' might be influencing these trends. With the 30-year fixed mortgage rate now over 7%, the dynamics in the housing market continue to evolve, influenced by broader economic factors.

This surge in existing home sales provides a complex picture of a housing market that is simultaneously grappling with tight supply, rising prices, and shifting consumer behaviors. As the market continues to adjust to economic pressures and demographic shifts, the landscape of U.S. housing remains a critical area to watch.

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