It’s looking like the Spring 2024 home buying season won’t be a bust after all.
First American Deputy Chief Economist Odeta Kushi expects another uptick in April existing-home sales on the back of increasing for-sale inventory.
“For several years, a persistent and historic lack of supply has restrained the housing market, but a recent uptick in inventory is poised to boost sales activity as the spring home-buying season peaks,” Kushi said.
In its monthly Existing-Home Sales Outlook Report, First American “nowcasts” April existing-home sales to rise by 0.7% over March, but remain modestly lower than the actual annual pace of sales one year ago.
First American’s projected April seasonally adjusted annualized rate is down 12% compared with the predicted pace of sales a year ago. The largest contributors to the projected monthly change are sales momentum (+1.1 percentage points), a boost in economic conditions (+0.1 percentage points), and greater credit availability (+0.08 percentage points).
The Federal Housing Finance Agency’s National Mortgage Database (NMDB) showed that in the fourth quarter of 2023, 87% of mortgaged homes had a rate below 6%. This simple fact, coupled with the fact that mortgage rates are currently around 7%, discourages existing homeowners to sell their properties, what is also known as the rate lock-in effect.
“While the majority of homeowners remain rate locked-in, the effect has diminished since hitting a peak in the final quarter of 2023, and sellers have un-anchored their expectations from the pandemic-low mortgage rates,” Kushi pointed out. “Additionally, high levels of home equity could mitigate the impact of the rate lock-in effect.”
New listings increased 16% in April year-over-year, but are still 22% lower than the average number of new listings in April 2018, 2019, 2021 and 2022.
First American’s projected April seasonally adjusted annualized rate is down 12% compared with the predicted pace of sales a year ago.
