August Market Report

August 21, 2024

The Big Story

Housing Market Seasonality vs. Expected Rate Cuts

Quick Take:

Nationally, home prices hit an all-time high in June 2024, and we estimate that prices may have bucked seasonal trends and climbed slightly higher in July.*
In July, the average 30-year mortgage rate declined for the third month, falling to 6.78%, a 0.44% drop from the 2024 high reached in early May. The Fed is poised to start cutting rates in September, which tends to be around the time the housing market really slows before the holidays.
Sales fell 5.4% month over month and year over year, while inventory rose to its highest level since 2020. The combination of rising prices and high interest rates has kept sales historically low. Although the market is shifting in buyers’ favor, we still expect sales to decline for the rest of the year.

Note: You can find the charts & graphs for the Big Story at the end of the following section.

*National Association of REALTORS® data is released two months behind, so we estimate the most recent month’s data when possible and appropriate.

Rate cuts expected during slowest months in the housing market

In June, prices rose for the fifth month in a row, reaching all-time highs. Typically, home prices begin to fall in July, but this year may be different. Currently, we estimate data to show that the national median home price rose very slightly in July. We are confident, at least, that prices have not fallen 5% from June to July, which means that July was the 13th consecutive month of year-over-year price growth. Despite the seasonal price dip, which is surely coming in the second half of the year, year-over-year price growth will almost certainly continue for months to come.

So why won’t prices see a major shift downward in the second half of the year? Seasonal trends already dictate that prices will decline starting around now. Combine that with high mortgage rates, slowing sales, and the highest inventory in four years, and it seems like we have the perfect recipe for prices to fall significantly. While home prices tend to increase over time, the pandemic buying boom set the stage for prices to rise more quickly than expected, and to stay high. In a funny way, higher interest rates have been incentivizing higher prices due to the cost of selling and buying at the same time. From June 2019 to March 2022, the average 30-year mortgage rate was less than 4%, and the averages for all of 2020 and 2021 were 3.11% and 2.95%, respectively. All that to say, those buyers who purchased their homes through financing, as most buyers do, in 2020 or 2021, and who plan to buy their next homes through financing at a much higher rate — they need to sell their current homes for much higher to combat the cost of financing new ones.

To further the point, the cost of financing the median home in June 2024 has increased 83% compared to June 2021, even though the sticker price of the median home is only up 16%. However, let’s say you bought the median home in June 2021 with 20% down, and then in June 2024, both sold your old median price home and bought the June 2024 median price home, your mortgage would only go up 55% rather than 83% because of the $60,000 price appreciation, which would bring you to ~30% equity in the new home. To be clear, 55% is still a lot, but it’s better than 83%.

Overall, inventory growth is great news for the undersupplied U.S. housing market. According to data from realtor.com, inventory reached its highest level since June 2020. The increasing inventory level should cause rising home prices to slow. In the pre-pandemic seasonal trends, sales, new listings, inventory, and price would roughly all rise in the first half of the year and decline in the second half of the year. Sales and new listings have been far lower than usual since mortgage rates started climbing, which is to be expected. Because we don’t anticipate sales to pick up until the spring of 2025, inventory could easily continue to grow in the second half of the year. Fed rate cuts will come right when the market really starts to slow down, so they probably won’t drive the market into a buying frenzy in the fourth quarter.

Different regions and individual houses vary from the broad national trends, so we’ve included a Local Lowdown below to provide you with in-depth coverage for your area. As always, we will continue to monitor the housing and economic markets to best guide you in buying or selling your home.

Big Story Data

The Local Lowdown

Quick Take:

Single-family home prices in Miami-Dade and condo prices in Orange reached all-time highs in July. We expected price contraction in the coming months, which is the seasonal norm.
Active listings have risen significantly for single-family homes and condos in 2024. We expect inventory to decline and the overall market to slow as we make our way through the second half of the year.
Months of Supply Inventory trended lower since the start of the year; for single-family homes, MSI indicates the selected markets favor sellers, while condo MSI shows a buyer’s market.

Note: You can find the charts/graphs for the Local Lowdown at the end of this section.

Median single-family home prices in Miami-Dade hit an all-time highs in July

In Florida, home prices haven’t been largely affected by rising mortgage rates — even reaching all-time highs during a period of high mortgage rates. In February, the median single-family home prices in Miami-Dade and Broward, and the median condo price in Orange, all hit all-time highs. In March, Miami-Dade single-family home and condo prices continued that trend, reaching new all-time highs again. Single-family home prices in Miami-Dade and Broward reached record highs in April. Miami-Dade single-family homes hit a record high again in May, as did Orange single-family homes. Then, in June, single-family home prices hit new record highs across markets. In July, single-family home prices in Miami-Dade rose to a new high. Prices have truly highlighted the demand in these markets.

Florida has been an interesting case study recently, where residents are starting to move because home insurance prices have risen, which has brought more listings to the market. However, demand is still incredibly strong, so the rising inventory and new listings have only raised prices as demand has grown.

Inventory levels near two-year high in the selected Florida markets for single-family homes and condos

Florida inventory patterns have been atypical since the pandemic started. Homebuyers flocked to Florida, dropping inventory to hyper-low levels. Only recently has inventory begun to build. Low inventory and new listings, coupled with high mortgage rates, led to a substantial drop in sales and a generally slower housing market from June 2022 to the present. Typically, inventory begins to increase in January or February, peaking in July or August before declining once again from the summer months to the winter. In 2023, inventory patterns didn’t resemble the typical seasonal inventory wave. Luckily, inventory has grown substantially in 2024 — especially for condos. The number of new listings coming to market is a significant predictor of sales, and the increase in new listings over the past few months has led to an increase in sales. In July, new listings declined, as did sales, so inventory will begin to contract in the coming months.

In terms of supply and demand metrics, in 2024, the selected markets aren’t trending similarly. Miami-Dade supply is showing signs that inventory will be tight for the rest of the year, and sales are slowing. Broward inventory is strong, but sales are also starting to slow. In Orange, inventory is still growing.

Months of Supply Inventory in July 2024 indicated a sellers’ market for single-family homes and a buyers’ market for condos

Months of Supply Inventory (MSI) quantifies the supply/demand relationship by measuring how many months it would take for all current homes listed on the market to sell at the current rate of sales. The long-term average MSI is around four to five months in Florida, which indicates a balanced market. An MSI lower than four indicates that there are more buyers than sellers on the market (meaning it’s a sellers’ market), while an MSI higher than five indicates there are more sellers than buyers (meaning it’s a buyers’ market). MSI rose significantly in the second half of 2023, largely due to the decline in sales and longer time on the market, and continued to rise in January 2024. However, January is unusual in that new listings jumped higher across the selected areas, which caused inventory to rise rapidly month over month and increased the proportion of active listings to sales. As expected, in February and March, MSI corrected and declined meaningfully across markets and continued to fall in April and May. In June, however, MSI rose for single-family homes and condos across the selected markets. In July, MSI indicated a sellers’ market for single-family homes, and for condos, MSI indicated buyers’ markets.

Local Lowdown Data