In March 2024, the average sales price of an existing single family home in the United States was $397,200.00 up 4.7% from March 2023. While prices of homes in the United States may appear to be at  an all time high, the total home sales have been decreasing as mortgage rates continue to soar. According to the National Association of Realtors, total home sales in March 2024 were down 4.3% from the previous month and down 2.8% from the previous year. 

On April 25, 2024, ATTOM, a leading curator of land, property and real estate data, released its first quarter 2024 Home Sales Report. This report showed that the profit margins on median home and condo sales in the United States decreased to 55.3%, down from 57.1% in Q4 2023. Additionally, this report showed that the median home price fell quarterly by 4.3%. 

According to Freddie Mac, the average interest rate on a  30 year mortgage rose to 7.22%, up from 7.17%, last week. Rising mortgage rates can add hundreds of dollars a month in costs for borrowers. This results in limiting  how much homebuyers can afford at a time when a relatively limited number of homes on the market coupled with heightened competition for the most affordable properties has kept prices marching higher. Additionally, borrow rates on a 15 year mortgage also rose to 6.47%, up from 6.44%. On May 1, 2024, the Fed announced that it does not plan on cutting interest rates until it has greater confidence that price increases are slowly sustainably to its 2% target. Most economists agree that until the Fed cuts interest rates, then mortgage rates are unlikely to ease. 

With regards to new home starts, 1,458,000 building permits were issued in March 2024, down 4.3% from February, yet up 1.5% from the previous year. Of those 1,458,000 building permits issued, 1,321,000 actually started construction on homes and condos, down 14.7% from February and 4.3% lower from the previous year according to the US Census Bureau. Construction on Multi-family homes (apartment buildings), continued to slow. Construction on buildings with five or more units decreased by 20.7% in March, and was down 43.7% from the previous year. 

The slowdown in single family housing starts reflects a more cautious outlook in the housing market. Perhaps builders are anticipating that interest rates will likely remain elevated for much longer than previously thought or maybe a large number of homes are still under construction. Either way, it is probably wise to “proceed with caution” when considering the value of investing in a home in the next few months. In 2008, the world was shocked when the housing market seemed to crash overnight. Yet, there were definite indicators back then that a housing crash should have been expected. The biggest indicator was probably the common occurrence of the banks approving individuals for home loans that they simply could not afford; thereby resulting in the nationwide bank failures and bank bailouts by our government. Be on guard. Similar signs exist. High interest rates challenge the affordability of owning a home, and yet, somehow home prices are still high. In March, the consulting firm Klaros Group, released its most recent financial analysis of thousands of banks across the U.S. Of the 4000 banks analyzed, 282 institutions have both high levels of commercial real estate exposure and large unrealized losses from the rate surge. This is a potentially toxic combination for these banks. Housing prices are at an all time high, banks are failing or at the very least, extremely stressed…. This is feeling all too familiar. 

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