The housing market’s still a mess with home prices dropping, but it doesn’t really help homebuyers.
According to data from the real estate firm. Home prices dropped to 6.4%. Active listings experienced a drop in the week ending May 26. Although this is not a large portion of listings, it’s a lot more than the 4.4% we saw during the same time in 2023.
It’s also more than the percentages we saw around years 2022 and 2021.
According to Redfin Chief Economist Daryl Fairweather, the housing market is starting to show signs of softening. This includes a decrease in home prices sold within two weeks of listing, down to 42.9% in May of 2024 and down 45.7% in the same period of 2023.
The new listings increased about 7.8% from the same period last year 2023. According to Redfin, this trend of real estate markets is still presenting ongoing challenges with home prices several years later.
Where do the home price challenges lie?
“Interest rates are still increasing, so the housing market is affecting both supply and demand,” Fairweather said. “Many potential first-time homebuyers are going to the rentals because it’s cheaper. And people with low interest rates see how expensive the housing market is. Their mortgage payments would increase a lot even if they were going to purchase a home for the same price. This situation restricts the supply.”
The idea that homeowners are stuck or “locked in” to their current homes is common. It’s because mortgage interest rates were incredibly low during the height of the pandemic. Then in 2022, the Federal Reserve began aggressively increasing rates, more than doubling mortgage interest rates.
The combination of high interest rates and increased prices has resulted in a record median monthly housing payment of $2,843, according to Redfin, marking up 13% over the same period last year.
Additionally, even though the prices are dropping on the market, the home prices are increasing, and new homes continue to be increasing in the housing market. It looks like a lot of sellers simply overestimated their home prices when attempting to sell.
“Just because there are more listings doesn’t mean they are priced correctly to attract buyers,” Fairweather mentioned, that condos are particularly difficult to sell.
According to Fairweather, that slight softness currently observed in the market does not signify any substantial price reductions or pending market corrections. If mortgage interest rates decline, whether due to positive inflation news or a Federal Reserve announcement, homebuyers will likely enter the market, once again reducing supply and driving prices higher.
“It could happen anytime. If interest rates fall, people would instantly be more motivated to buy a home,” Fairweather said. “You’d notice more people fighting over the one or two homes available on the housing market and more homes are being sold.”
At the end of the day, the current market is the outcome of an artificially limited housing supply in some of the most popular places to live, Fairweather said. She mentioned zoning rules that prevent the construction of new home prices in those locations.
“There is a significant shortage of new housing being developed to meet demand,” Fairweather said. “We need to have buyer’s market, and we’re still far from it.”
Baby boomers, Millennials, and Gen Z are facing a contentious housing market conflict
A Redfin report from earlier this year indicated that the length of time people staying in their homes is twice as long as it has been since 2006. In that year, the median homeowner spent around 6.5 years in a home. This duration peaked at 13.4 years in 2020 before decreasing to 11.9 years in 2023.
According to the study, 56% of baby boomers have lived in their home for at least 10 years, and for Gen Xers, it’s 35% them have lived in their home, but only 7% of millennials have stayed in their home for 10 years or longer.
Older Americans tend to own homes. A separate Redfin analysis revealed that empty-nester baby boomers have twice as many three-bedroom-plus or larger homes as millennials with kids.
The houses that are going for sale increasingly require significant renovations. A report from Leaf Home and Morning Consult found 73% of baby boomers have lived in their current homes for 11 years or more, with over half of their own homes built in 1980 or earlier have never been renovated. Most of them say they have no plans or have undertook any renovations.
