Time for a Move? Sellers Are Perking Up.

Home sellers are back. It’s an important sign of confidence in the U.S. housing market.

Fannie Mae keeps tabs on people’s feelings (“sentiment”) about the market. And people are feeling better about it — if they happen to be potential sellers. Two-thirds of the people surveyed told Fannie Mae this is a good time to sell.

Then there are the would-be buyers. With the median U.S. listing price hovering close to $400K, just 17% of the survey’s respondents think now’s a good time to buy. Home buyers have to deal with elevated home prices and mortgage rates.

But spring is in the air. And springtime sellers are placing homes on the market. That’s pressing the number of 2024 mortgage applicants up, too.

As Mortgage Rates Fall, Will Even More Sellers Come?

The typical mortgage is a 30-year, fixed-rate loan. This type of loan has an interest rate of about 6.9% as of late March 2024. That’s a high rate, relative to what most current mortgage holders pay.

While the rates are still sidelining many potential buyers, this should be less of an issue as the year unfolds. Interest rates are widely expected to dip down after a series of federal bank rate cuts likely to begin this summer.

We can’t expect to see a return to the bargain-basement rates homeowners grabbed in 2021. But rates are already easing downward from their 7.8% peak last October.

And now, Fannie Mae’s survey shows, both buyers and sellers feel better about where mortgage interest rates are likely headed. Fannie Mae envisions rates as low as 6% later this year. A dip like that will definitely draw more sellers into the market. For them, moving into a new place with a 6% mortgage rate isn’t so painful as having to accept 7%+.

Some Buyers Are Bidding…

Latest figures from the National Association of REALTORS® (NAR) show home prices generally higher than they were last year at this time, by about 6%. That’s good news for the sellers.

Homeowners in some markets are putting their homes up for sale, and promptly finding themselves choosing among multiple buyers. As we can imagine, a lot of these spring buyers are very financially strong:

One in every five home buyers in February 2024 offered their sellers more money than the asking price.

A third of the people who bought homes in February 2024 paid for these homes in cash.

One in every five home buyers in February 2024 were small investors or people buying vacation homes.

No wonder Fannie Mae’s survey is picking up on positive buyer attitudes during this spring market.

…And Others Are Biding Their Time.

Of course, the return of bidding contests is extremely frustrating to people just trying to get a toehold in the market. First-time buyers are getting squeezed out by repeat buyers.

Why are first-timers disadvantaged? Because return buyers now have a stash of built-up home equity, giving many a tremendous leg up in this market.

Sales of existing homes are on a roll, Yahoo Finance reports, because buyers have “accepted the new normal of higher mortgage rates.” Accepted the new normal? Wait a second. Only one in four home buyers are first-timers. Where are the homes a first-time buyer can afford? Let’s not sideline a generation here.

The U.S. Housing Supply: Approaching an Inflection Point?

In any case, more inventory helps curb runaway prices, and it’s good to hear about it. The housing economists are starting to sound optimistic again:

Lawrence Yun, NAR’s chief economist, thinks we may now be on the rebound from a low point in housing supply. This signals a turning point after high mortgage rates and low inventory squelched the 2023 market.

Fannie Mae chief economist Doug Duncan thinks we could be approaching an inflection point. Already, U.S. housing inventory stands 12% higher than it did in the 2023 spring season. Duncan anticipates continuing boosts in housing supply, given homeowner perspectives on selling in the 2024 market.

Economists also talk about an additional reason we can expect the supply of homes to keep rising. That’s builder sentiment. Builders now report renewed interest in starting construction and renovation projects.

More than a million homes arrived on the market at the start of this month (March 2024). Fannie Mae takes that as a positive sign, but so far the early 2024 market has largely dealt with luxury homes. Modest starter homes are still in critical demand.

When homeowners see homes out there at prices they can stand to buy, more of them will put their own homes up for sale. And that will be most helpful to sidelined buyers.

Timing the Market? It’s Complicated.

Potential buyers are still looking for affordability. Many people are waiting until rates dip in the second half of 2024 before they’ll get out and buy. But waiting for just the right entry point won’t be a surefire bet — even in 2024.

First, while the Federal Reserve will likely act to bring down lending rates later this year, making mortgage rates likely to follow a downward trend, that’s not guaranteed.

And assuming rates do come down, lower interest rates will make the market that much more competitive. People think they’ll get an advantage by waiting — but those who wait will be competing with everyone else who’s also waiting.

Those committed to buying could buy now and refinance later if rates drop significantly.

Welcome Back, Sellers. We Missed You.

We’re now seeing a clear trend. More selling! Last year’s homeowners were much too comfortable with their low-interest mortgages to move. This year’s homeowners are easing back into the market. The Fannie Mae Home Purchase Sentiment Index® is rising significantly, year-over-year — mainly due to the way potential sellers responded. For sellers, the market’s looking pretty good!

If mortgage rates continue to ease throughout the year — as many financial commentators expect — then buyers, too, should see some light at the end of the tunnel. And little by little, sidelined buyers will have more to explore. As Fannie Mae’s Doug Duncan says: “Inventory this spring is looking much better for prospective home buyers than any recent year.”

So, are you getting sentimental about housing this season? Whether you’re selling or buying this spring, or just staying in place and enjoying your home, we wish you a very good year.

Supporting References

Fannie Mae Newsroom via FannieMae.com: Home-Selling Sentiment Moves Higher Ahead of Spring Homebuying Season (Mar. 7, 2024; press release from Fannie Mae’s Economic and Strategic Research Group, led by Chief Economist Doug Duncan, announcing Fannie Mae’s February 2024 National Housing Survey and Home Purchase Sentiment Index®).

Mike Simonsen of Altos Research in HousingWire, via HousingWire.com: Sellers Are Coming Back to the Housing Market; Can Buyers Keep Up? (from HW Media, LLC; Feb. 12, 2024).

Gabriella Cruz-Martinez for Yahoo Finance: Sellers Are the Only Ones Happy in Today’s Housing Market, Fannie Mae Survey Finds (updated Mar. 9, 2024).

Gabriella Cruz-Martinez for Yahoo Finance: Home Sales Surge as Buyers Make Peace With Elevated Mortgage Rates (updated Mar. 21, 2024)

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