In this installment of The Full Measure with Kevin Hecht, uncover June 2024 housing market insights and helpful action items for real estate appraisers.
As we move through the middle of 2024, the real estate market continues to face a complex landscape shaped by economic factors, interest rates, and shifting demand patterns. This update examines key trends across various segments of the housing market, providing critical insights for real estate appraisers.
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June 2024 housing market insights
The housing market has experienced a slowdown in recent months, primarily due to persistently high mortgage rates and elevated home prices. Total home sales, including both existing and new homes, decreased by 2.3% from March to April and were down 2.7% compared to the previous year. This trend highlights ongoing challenges in the market, particularly for first-time homebuyers.
Existing homes sales
According to the National Association of Realtors (NAR), existing home sales fell for the third consecutive month in May. The seasonally adjusted annual rate of sales declined 0.7% to 4.11 million units, which is 2.8% lower than a year ago. This decrease is largely attributed to lingering high mortgage rates and record-high prices. The median sales price for existing homes reached a new record of $419,300 in May, up 5.8% from last year. Despite these challenges, the first-time buyer share stood at 31% in May, up from 28% a year ago but down from 33% in April.
New home sales
New home sales in April fell 4.7% from March to an annualized rate of 634,000, accounting for about 13% of total home sales. However, new home inventory has reached its highest level since January 2008, potentially offering some relief to the tight housing supply.
Housing starts
Housing starts retreated in May, with overall starts falling 5.5% to a seasonally adjusted annual rate of 1.28 million units. Single-family starts decreased 5.2% to 982,000 units, while multifamily starts declined 6.6% to 295,000 units. Despite this monthly decline, single-family starts are up 18.8% year-to-date, albeit compared to weak early 2023 data. The multifamily sector continues to decelerate, with the three-month moving average for multifamily starts at its lowest since fall 2013.
Home price growth
Home prices continue to rise, driven by low inventory and resilient demand. The FHFA Purchase-Only Home Price Index increased by 0.1% month-over-month in March, with year-over-year growth remaining strong at 6.7%. States like Vermont, New Jersey, and New York saw the highest annual appreciation rates. However, rising inventory levels may help moderate price growth in the coming months.
Employment
The labor market remains robust, with 272,000 jobs added in May, exceeding expectations. The unemployment rate ticked up to 4% for the first time since January 2022 but remains historically low. Job openings decreased to 8.1 million in April, indicating some cooling in the labor market.
Inflation and its impact on the real estate sector
Inflation continues to be a concern for the real estate market. The core Personal Consumption Expenditures (PCE) price index, the Federal Reserve’s preferred inflation gauge, rose 0.3% month-over-month in April. While there are signs of moderation, consistent progress is crucial for potential interest rate reductions. The Consumer Price Index (CPI) for shelter showed some softening, marking the slowest increase since October 2023.
Mortgage rate trends
Mortgage rates have been volatile, averaging 7.06% in May for 30-year fixed-rate mortgages. This high-rate environment continues to impact both home sales and mortgage activity. While there’s potential for gradual easing of rates later in the year, they are expected to remain above 6.5% through the end of 2024.
Conclusion
The real estate market in mid-2024 faces several challenges, including high mortgage rates, elevated prices, and limited inventory. However, there are also signs of resilience, particularly in the new home and single-family construction segments. As we move forward, potential moderation in inflation and a possible easing of interest rates could provide some relief to the market. Real estate appraisers should stay informed about these evolving trends and adjust their valuation strategies accordingly.
Specific actions for real estate appraisers to stay informed
1. Regularly review market reports
Stay updated with monthly and quarterly reports from reliable sources such as the National Association of Realtors (NAR), the Federal Housing Finance Agency (FHFA), and other reputable real estate research organizations. These reports provide crucial data on sales trends, price changes, and inventory levels.
2. Attend industry conferences and seminars
Participate in industry conferences, seminars, and webinars. These events often feature expert speakers who provide insights into market trends, economic forecasts, and regulatory changes that can impact real estate appraisals.
3. Subscribe to real estate publications
Subscribe to leading real estate publications and newsletters. Publications such as Real Estate Appraiser Magazine, Appraisal Buzz, and HousingWire offer timely articles and analysis that can help appraisers stay abreast of current market conditions and industry best practices.
4. Network with industry peers
Engage with other real estate professionals, including fellow appraisers, real estate agents, and brokers. Networking can provide valuable firsthand information about local market conditions and emerging trends.
5. Utilize technology and data analytics
Leverage technology and data analytics tools to track market trends and analyze property data. Platforms like Zillow, Redfin, and CoreLogic offer comprehensive data sets that can enhance the accuracy of appraisals.
6. Stay updated on regulatory changes
Keep informed about changes in real estate regulations and appraisal standards. Regulatory bodies such as the Appraisal Foundation and state appraisal boards frequently update guidelines that can impact appraisal practices.
7. Participate in continuing education
Enroll in continuing education courses to enhance your knowledge and skills. McKissock offers courses on valuation techniques, market analysis, and the latest industry developments.
8. Engage with local real estate boards
Participate in local real estate boards or associations. These organizations often provide valuable resources, including market data, educational opportunities, and forums for discussing local market conditions.
9. Monitor economic indicators
Keep an eye on key economic indicators such as employment rates, inflation, and interest rates. Understanding the broader economic context can help appraisers anticipate market shifts and adjust their valuations accordingly.
By taking these specific actions, real estate appraisers can maintain a comprehensive understanding of the market, ensure the accuracy of their valuations, and adapt to changing conditions effectively. Staying informed and proactive is essential for providing high-quality appraisal services in a dynamic real estate landscape.
Thank you for reading The Full Measure with Kevin Hecht. We hope you enjoyed this June 2024 housing market update. Subscribe to our newsletter to get valuable economic insights, career tips, and industry news right to your inbox.
