Real Estate Market Update Spring 2024

As the NY Times reported recently, (Apr 20, 2024), “something deeply unusual has happened in the American housing market over the last two years.” While most of us are aware that current mortgage rates are currently running at 7%, we may be ignoring the unprecedented underlying impact of the average American household fixed mortgage rates—that are fully 3% lower.

Individuals and families who are locked into mortgages at 3 or 4% are simply deciding that this is not the right time to move or to sell, especially when they compare what they have to what would be affordable. Even potential sellers who would like to move for a job or other reasons are deciding to stay put. 

According to research from economists at the Federal Housing Finance Agency, this lock-in effect is responsible for about 1.3 million fewer home sales in America from mid- 2022 to 2023.  In North Florida, we’ve seen this same effect, with fewer homes for sale—and this scarcity has in turn kept home prices high, increasing 8.8% as reported by the Northeast Florida Association of Realtors from March 2023 to March 2024. 

Historically, homeowners (sellers) are also new buyers— and their absence from the markets, along with the affordability crunch for first time buyers (high interest rates and high prices), is also depressing the number of buyers.  

The locked-in-effect of the 3+ percent gap between average fixed mortgage rates and rates for new home loans is now likely to persist at least into 2025. In January of 2024, financial pundits were calling for the Fed to lower interest rates four or five times during the year. If that had actually happened, overall interest rates could have dipped to 5.5% or lower. Presumably, many more homes would be bought and sold. Recent indications predicated on inflation reports (3.8% vs 2.0% target) and a robust U.S. economy are that, at most, we can expect one or two 25 basis-point reductions in the later part of 2024, if any at all. In other words, don’t wait for a rate cut. 

For those of us here in the Ponte Vedra area:

• Market inventory will remain lower than usual throughout 2024, even in our peak months of April, May, and June. Potential sellers will continue to hold back as home mortgage rates stay high for the remainder of the year.  
• We are seeing fewer buyers, and most of the interest is directed toward well-maintained homes that are priced to sell and that show well. Aspirationally-priced homes, a trend that was popular in the 2022 to 2023 run-up, are getting few viewings. Pricing well up-front matters, as homes that take more than 60 days to sell generally end up not only dropping their price but also tend to end up making higher concessions.  
• Both new and resale home sales are offering some level of concessions to entice buyers. We are also seeing a resurgence in “staging” to help draw buyer interest.
• New home sales may account for a larger portion of total market sales in 2024, based on builders’ ability to buy down home loan interest rates, now also a common practice. 

In summary, we are in an unprecedented situation where existing average fixed mortgage rates are affecting almost every aspect of the home buying market. Overall, new mortgage rates have not dropped in 2024 and seem unlikely to do so in this election year—staying in the 7% range. The basics still matter—a well maintained and marketed home will attract and create buyers. Seasonality is also a key factor in our market, with more homes bought and sold in the second and early third quarter than any other time in the year. Stay tuned for frequent updates as we chart market progress in the coming months!