Low inventories and expectations that mortgage rates could go lower are supporting market demand and pushing up prices.
Home prices in the United States continued to move up last month, potentially set to go north further as more prospective buyers enter the market, according to real estate brokerage Redfin.
Home prices rose by 0.5 percent month over month in October, according to a Nov. 19
report from the company. Prices have appreciated on a monthly basis for every single month over the past year. On a yearly basis, there was a 5.9 percent increase in October. Many prospective buyers opted to stay out of the market this year because of high mortgage rates, thus limiting price growth, Redfin said. For 2024, the average 30-year fixed mortgage
rate has consistently remained above the 6 percent level, according to data from mortgage lender Freddie Mac.
As to the future direction of home prices, the lender pointed out that the housing market is still experiencing a shortage of properties and therefore prices could continue moving higher.
Out of the 50 tracked
metropolitan areas in the analysis, 42 registered month-over-month home price gains. San Francisco saw the largest price appreciation at 2.26 percent. This was followed by Detroit; Nassau County, New York; and Boston, each of which saw prices appreciate by more than 1 percent.
“Many people—especially first-time buyers—were waiting until after the election to make a decision about buying a home,” said Redfin senior economist Sheharyar Bokhari.
“Now the election is over, we have started to see signs that homebuyer demand is coming back. That could lead to increased competition in coming months, possibly pushing prices higher unless we see a major spike in the number of homes being listed.”
A recent report by real estate marketplace Zillow
predicts that home values will rise by 2.6 percent this year and by 2.8 percent over the coming 12 months.
“Opposing forces are working to keep home values climbing, but only at a modest pace,” it said. Factors such as very low inventory and expectations for lower mortgage rates are providing upward support for prices.
In contrast, elevated mortgage rates and a slight increase in for-sale inventory are contributing to restricting the growth in home prices, Zillow noted.
Future Market
A key determinant for the trajectory of home prices and mortgage rates over the coming months could be actions taken by President-elect Donald Trump in his second term in office.Redfin
called for more housing from Trump, noting that this can be done by “setting aside well-meaning regulations on home-building that limit construction and make housing less affordable: local comment periods, traffic studies, parking requirements, environmental reviews in already well-settled areas, and limits on apartment buildings in neighborhoods of single-family homes.”
During his campaign, Trump
proposed bringing down mortgage rates by first reducing inflation. Other ideas put forward by Republicans include doing away with unnecessary regulations and opening parts of federal lands for new construction.
During a recent forum in Boston, Lawrence Yun, chief economist of the National Association of Realtors,
said that no matter who won the presidential election, “there’s usually a slight boost in home sales.”
He pointed to signs that the market could be improving, including a 3 percent annual jump in pending sales in September and increasing inventory for existing as well as new homes.
Yun expects the median home price to rise by 2 percent in 2025, to $410,700.
“The strong price increases cannot be sustainable for another five years, or America will be divided ... with only a few getting to experience the tremendous housing wealth,” he said.
“If we bring more supply to the housing market, home price increases will not be as outrageous ... and will be more in line with wages.”
