Spring is historically the busiest season for the housing market. Over the last few years, there has been a significant increase in the number of homebuyers, but a shortage in the amount of available property. The already limited number of homes for sale took a hit during the pandemic.
Many homeowners reconsidered putting their houses on the market until the country stabilized. While some homeowners may be more confident about listing their homes for the upcoming season, many are still on the fence.
With such limited options, homes are selling for an all-time high, making it even harder for homebuyers to find a good deal.
To Buy or Not to Buy
In previous years, there was a steady decline in the number of first-time homebuyers. This was largely because buying a house was seen as too expensive, especially with a sharp rise in the general cost of living. Some experts predicted the financial uncertainty from the COVID-19 pandemic would further discourage new homebuyers.
However, the pandemic caused rental rates to rise in many parts of the United States. Many renters looking for their first house are still concerned about the price, but figure if rental rates are going to cause as much financial stress as paying a mortgage, it may be better for them to at least own their own home.
Existing homeowners have the opposite problem. While they may be able to sell their house for more, it also means they’re spending more to buy a new home. Even if they plan to downsize, it could be more costly to move than to stay in their current home. Mortgage rates have been steadily increasing, so there’s a good chance moving into a new home could result in higher interest rates.
Home Prices
2024 actually saw a decrease in median home sale prices. 2024 ended with a median home price of $420,400, which is a bit less compared to the first quarter of 2023 (Q1), where the median price was $429,000.
This may be a good sign, considering that 2022 saw one of the biggest spikes in housing prices. The average cost of a home rose by more than $80,000.
As a side effect of the pandemic, interest rates hit a record low. In 2021, 15-year mortgages hovered around 2.15%, while 30-year mortgages were frequently under 3%. But those numbers were short lived. Shortly thereafter, the Federal Reserve announced a rise of 0.5 percent in the interest rate to slow inflation.
October of 2023 saw one of the highest average interest rates in years, peaking at just below 8%. At the end of 2024, average interest rates on 30-year mortgages settled to 6.87%.
The fluctuations in both housing prices and mortgage rates does not appear to be temporary. Many housing experts are predicting a continued increase in interest rates in the following years, even as home prices remain the same or experience a slight decline. This is yet another reason why so many homebuyers are trying to find a house now before it becomes even harder to justify the cost.
Housing Availability
Because of the greater demand for houses, homes are staying on the market for shorter periods. Based on data from 2024, most homes are expected to sell in under a month. This means that if you’re planning to buy a house, you don’t want to sit on a potential purchase.
The number of homes for sale has started to rebound from a low point in March 2021. In November 2024, home sales increased to an adjusted rate of 4.15 million. That’s up 6.1% from a year ago, which is the largest increase since June 2021.
An Upcoming Crash?
Given the chaos caused by the pandemic, there was concern that the housing market might experience a crash similar to the previous recession. While this was initially a valid concern, it was quickly realized to be false.
Unlike the 2008-2010 housing crash, there’s a huge group of homebuyers (even those who are willing to purchase above the asking price), keeping housing prices from plummeting. Mortgage lenders also enacted stricter rules to limit the number of defaults from subprime mortgages.
Not to mention that Zillow predicts home prices to rise by a steady 2.5% throughout the year, a sign of a healthy seller’s market.
