Market Update 1/18/2024

19% rise in refinance applications, which were 30% higher than the same period last year. Purchase loan applications also saw a 6% increase, although they remained 16% lower than the previous year. This surge in applications suggests a robust response from buyers and refinancers to the dynamic rate environment, albeit contending with ongoing challenges like limited supply and overheated home prices.

Housing's Role in Inflation

Inflation, as measured by the Consumer Price Index (CPI), rose by 0.3% in December, with shelter costs accounting for over two-thirds of this increase. This inflation pressure reflects the significant role housing costs continue to play in the broader economic landscape. Interestingly, while shelter costs rise, the overall inflation rate has seen a reduction, nearly halving from 6.5% in late 2022 to 3.4% by the end of 2023.

Retail Sector and Economic Cooling

December also marked a period of solid gains for retailers, wrapping up the holiday season on a strong note. Core retail, excluding restaurants, rose by 0.2%. However, the overall slowdown in the housing industry in 2023 has impacted consumer spending patterns, particularly in sectors like electronics, appliances, and furniture. Wall Street, despite a post-Christmas dip, remains bullish on retail, with a notable 21% rise since late October. The upcoming retail earnings reports in late February will be crucial in revealing the industry's adaptation to the changing price dynamics.

Deficit Concerns and Consumer Credit

A significant fiscal development was the rise in the U.S. deficit, which surged 52% higher than a year ago, exceeding $34 trillion for the first time. This increase highlights the continued financial pressures facing the government, despite the slowdown in inflation. In the consumer credit sector, November saw total consumer credit reaching a historic $5 trillion, with a 17.7% increase in revolving credit, mainly credit card debt. The rise in average credit card interest rates to a historic high of 21.5% and new car loan rates reaching 8.15% is a trend worth monitoring for its potential impact on consumer spending and borrowing behaviors.

Regulatory Landscape and NAR Leadership Change

On the regulatory front, the Consumer Financial Protection Bureau (CFPB) issued new guidance to tackle issues with inaccurate background check reports and lax file sharing among credit reporting companies. This move underscores the need for updating consumer information and ensuring individuals' rights to access their complete files. In a significant leadership change, the National Association of Realtors (NAR) saw President Tracy Kasper step down, following a blackmail threat, with President-elect Kevin Sears stepping in as the new president.

Common Questions About the 2024 Housing Market

Will 2024 be a better year for buyers?

This year should bring more hope for homebuyers, as pandemic-driven inflation continues to wane, mortgage rates come down, and more people list their homes for sale. These dynamics are good news for anyone who is planning to move this year!

Will home prices change?

Nationwide, we’re expecting a 1% decrease in home prices throughout 2024, though this will vary across regions. Affordable, climate-resilient metros may see price increases as more people choose to move there, while home prices in places like Florida that saw a surge of appreciation during the pandemic have more room to fall.

Will mortgage rates fall?

Mortgage rates have already begun to decline, hitting 6.5% this month. We expect rates to continue to decline throughout the year, with some volatility but ultimately remain above the record lows we saw during the pandemic. Any sort of rate relief is welcome news for buyers, and should also help ease the hesitation we’ve seen with sellers, bringing new inventory to the market.

Will the market be competitive in 2024?

A modest increase in new listings paired with lower rates will bring more buyers—and more competition—to the market. We expect home sales will gain momentum as the year goes on, so if you’re buying this year, it’s a good idea to start your search now before competition ramps up.

Are there other reasons to be optimistic about the housing market?

Yes! We anticipate housing affordability will become a hot topic for political candidates this election cycle, bringing some much-needed attention to policies that affect homeownership across the country. Even if policy changes happen, they're unlikely to take effect immediately, so don't let a looming election upset your plans.

Latest Reports and Resources

• Latest Jobs Data Makes March Rate Cut Slightly Less Likely

• 16% of Home Listings Were Affordable for the Typical Household in 2023, Likely the Bottom for Housing Affordability

• The Pandemic-Driven Migration Boom Is Waning, With the Share of Homebuyers Relocating at Lowest Level in 18 Months

• Latest market data

Conclusion

As 2024 unfolds, the real estate market continues to be a complex interplay of mortgage rates, housing-driven inflation, and shifting economic and regulatory landscapes. For real estate enthusiasts, keeping abreast of these developments is crucial in navigating the market effectively. Whether you're a buyer, a seller, or an investor, understanding these dynamics will be key to making informed decisions in this ever-evolving market. 

There's always something happening in the world of real estate, and I'm here to guide you through it. For deeper insights, use the link below to tune in to the Hungry Realtor Podcast (Season 2 Coming Soon!), and let's navigate these fascinating times together.