Daily Dose of Real Estate for November 6
The U.S. housing market continues to show signs of stabilization as we approach the end of 2024, with mortgage rates moderating from their recent peaks and inventory levels gradually improving. While challenges persist, particularly in terms of affordability, there are indications of a more balanced market emerging. The interplay between interest rates, home prices, and buyer demand continues to shape the market landscape, presenting both challenges and opportunities for various stakeholders in the real estate sector.
Key Takeaways
Residential Real Estate Markets
The residential real estate market has shown signs of stabilization in 2024, with sales activity picking up slightly and home prices continuing to appreciate at a moderate pace.
Existing Home Sales Improve: According to the National Association of REALTORS?, existing home sales reached a seasonally adjusted annual rate of 3.96 million units in September 2024, showing a slight improvement from earlier in the year. This uptick suggests that buyers are gradually adjusting to the current market conditions [National Association of REALTORS?](https://www.nar.realtor/newsroom/existing-home-sales-climbed-0-9-in-september).
Home Price Appreciation Continues: The S&P CoreLogic Case-Shiller US National Home Price Index showed a 3.9% annual increase in August 2024. This moderate price growth reflects the ongoing balance between buyer demand and available inventory in many markets [S&P Global](https://www.spglobal.com/spdji/en/index-announcements/article/sp-corelogic-case-shiller-index-reports-39-annual-home-price-gain-in-august/).
Regional Variations in Price Growth: Home price growth continues to vary across regions. In August 2024, cities in the Southeast and Southwest reported the highest year-over-year gains among the 20 cities tracked by the Case-Shiller Index, while some Midwest and Northeast markets saw more modest appreciation [S&P Global](https://www.spglobal.com/spdji/en/index-announcements/article/sp-corelogic-case-shiller-index-reports-39-annual-home-price-gain-in-august/).
New Home Sales Performance: The new home market has shown resilience in 2024. The U.S. Census Bureau reports that new single-family home sales reached a seasonally adjusted annual rate of 759,000 in September 2024, up 12.3% from August. This increase suggests that builders are successfully adapting to market conditions and meeting buyer demand [U.S. Census Bureau](https://www.census.gov/construction/nrs/pdf/newressales.pdf).
Inventory Levels Improving: The supply of homes for sale has gradually improved throughout 2024, providing more options for potential buyers. This increase in inventory has helped to create a more balanced market in many areas, though some regions still face supply constraints.
Mortgage Markets
The mortgage market has shown signs of stabilization in 2024, with rates moderating from their recent peaks and lending activity picking up.
Mortgage Rate Trends: After reaching multi-year highs in 2023, mortgage rates have moderated in 2024. Freddie Mac reports that as of November 2, 2024, the average 30-year fixed mortgage rate was 6.95%. While still higher than the historic lows seen in recent years, this represents a significant improvement from the peaks of 2023 [Freddie Mac](https://www.freddiemac.com/pmms).
Impact on Affordability: The moderation in mortgage rates has provided some relief to potential buyers, improving affordability compared to the previous year. However, the combination of home prices and current rates continues to pose challenges for some segments of the market, particularly first-time buyers and those in high-cost areas.
Refinance Activity: With rates stabilizing at lower levels than the 2023 peaks, there has been a modest uptick in refinance activity. However, the market remains primarily purchase-driven, with lenders focusing on home buyers rather than refinancing homeowners.
Mortgage Application Trends: Mortgage application volume has shown sensitivity to rate fluctuations throughout the year. The recent moderation in rates has led to increases in both purchase and refinance applications, indicating pent-up demand in the market [Mortgage Bankers Association](https://www.mba.org/news-and-research/research-and-economics/single-family-research/weekly-applications-survey).
Commercial Real Estate Markets (including Multifamily)
The commercial real estate sector has continued to evolve in 2024, with performance varying across different property types.
Office Sector Adaptation: The office market has shown signs of stabilization as companies finalize their long-term workplace strategies. While remote and hybrid work models remain prevalent, there's increasing demand for high-quality, amenity-rich office spaces that support collaboration and company culture [CBRE](https://www.cbre.com/insights/reports/us-real-estate-market-outlook-2024).
Industrial Strength Continues: The industrial real estate sector remains robust, driven by ongoing e-commerce growth and the need for efficient supply chain networks. Demand for warehouse and distribution space continues to outpace supply in many markets [JLL](https://www.us.jll.com/en/trends-and-insights/research/industrial-market-statistics-trends).
Multifamily Market Dynamics: The multifamily sector has demonstrated resilience in 2024, benefiting from strong rental demand in many markets. However, the sector faces challenges related to affordability and increased supply in some areas [Yardi Matrix](https://www.yardimatrix.com/publications/download/file/2024-10-multifamily-national-report-matrix).
Retail Sector Recovery: The retail real estate sector has continued its recovery in 2024, with brick-and-mortar stores adapting to changing consumer preferences. Experiential retail and mixed-use developments have gained traction, while some traditional retail spaces have been repurposed for other uses [Cushman & Wakefield](https://www.cushmanwakefield.com/en/united-states/insights/us-marketbeats/us-retail-marketbeat).
CMBS/REIT Markets
The Commercial Mortgage-Backed Securities (CMBS) and Real Estate Investment Trust (REIT) markets have shown resilience in 2024, reflecting the broader trends in commercial real estate.
CMBS Performance: The CMBS market has demonstrated stability in 2024, with delinquency rates remaining relatively low. However, there are ongoing concerns about the performance of certain property types, particularly older office buildings and some retail assets [Trepp](https://www.trepp.com/trepptalk/cmbs-delinquency-rate-october-2024).
REIT Market Trends: REITs have shown varied performance across different property sectors in 2024. Industrial, data center, and healthcare REITs have generally performed well, while office REITs have faced more significant challenges. The multifamily and retail REIT sectors have shown improvement as market conditions stabilized [Nareit](https://www.reit.com/data-research/research/nareit-research/reits-2024-navigating-changing-landscape).
Investor Sentiment: Investor sentiment in the CMBS and REIT markets has improved in 2024, buoyed by the moderation in interest rates and signs of economic stability. However, investors remain selective, focusing on high-quality assets and markets with strong fundamentals.
The Bottom Line: A Market in Transition
As we approach the end of 2024, the U.S. real estate market continues to navigate a period of transition. The moderation in mortgage rates from their 2023 peaks has provided some relief to buyers, while gradual improvements in inventory levels have helped create a more balanced market in many areas.
For buyers, the current environment presents both opportunities and challenges. The improved affordability compared to 2023 and increased inventory provide more options, but competition remains strong for well-priced properties in desirable locations. Buyers should carefully assess their long-term housing needs and financial situation, working closely with real estate professionals to navigate these market conditions.
Sellers continue to benefit from home price appreciation, albeit at a more moderate pace than in recent years. While the market is more balanced, well-priced and well-presented homes continue to attract strong interest, particularly in high-demand areas.
Looking ahead to 2025, the real estate market is expected to continue its path of stabilization. The interplay between interest rates, economic conditions, and demographic trends will play a crucial role in shaping market dynamics. Both buyers and sellers should stay informed about local market conditions and work closely with real estate professionals to make informed decisions in this evolving landscape.
As the market transitions, stakeholders across the industry must remain adaptable and informed to successfully navigate the opportunities and challenges that lie ahead in this dynamic environment.
Impact Capitol DC SitusAMC Mortgage Bankers Association The Mortgage Collaborative National MI National Association of REALTORS? National Mortgage News National Association of Home Builders Federal Reserve Board Federal Reserve Bank of New York Federal Reserve Bank of San Francisco Federal Housing Finance Agency Federal Housing Administration and HUD Office of Housing Fannie Mae Freddie Mac Consumer Financial Protection Bureau The White House