As we near the fourth quarter of 2024, the traditional peak of the home-buying season has passed, and the real estate market is entering a period of transition. Home prices, which typically reach their highest point around the end of June, have remained stable thus far. However, a dip is anticipated as we move deeper into the second half of the year. With buyer demand notably slow this year, the inventory of unsold homes is expected to continue its climb through the end of Q3, and possibly into Q4, according to a recent study from Altos Research.
As of July, there were approximately 646,000 unsold single-family homes on the market in the U.S., marking a significant increase from earlier in the year and a substantial rise compared to the previous year. This growing inventory is expected to persist until October, driven by elevated mortgage rates that are keeping many potential buyers on the sidelines. Unlike pre-pandemic years, where inventory levels might have peaked by August, the current trend suggests that this peak could occur later in the year, reflecting a shift in the seasonal dynamics of the market.
New listings have also shown signs of tapering off, with just under 71,000 new unsold listings reported in early July. Although there is no sharp drop expected in new listings immediately, a gradual decline is anticipated as the year continues to progress. This suggests that the market will see a steady but slow influx of homes, contributing to the sustained high levels of inventory through the remainder of 2024.
Pending sales have remained relatively flat, with around 67,000 new contracts being initiated as of July. This stagnation further underscores the subdued buyer demand, pointing to a likely continuation of home sales at an annualized rate of about 4 million transactions for the rest of the year. This sales rate is lower than many expected at the beginning of the year, largely due to mortgage rates remaining higher than anticipated, which has kept affordability out of reach for many buyers.
Additionally, price reductions have become increasingly common, with over a third of homes on the market having adjusted their asking prices downward. This trend is expected to lead to a flattening of home price appreciation in the latter half of the year. Inventory levels are projected to peak at around 700,000 homes by October, with the year likely ending with 20-30% more homes on the market compared to the end of 2023.
Looking forward, the real estate market is likely to remain challenging for sellers as inventory grows and buyer demand stays muted. However, for buyers, this could mean more options and potentially better deals as the year progresses. The key factors to watch will be mortgage rates and any shifts in the broader economy that could influence both buyer and seller behavior.
Click here for more on the forecast from Altos Research.
