As the spring season approaches, many people are gearing up for new beginnings and fresh starts, including in the real estate market. However, this year’s spring homebuying season is not following the typical trends due to high mortgage rates, low housing inventory, and steep home prices. While mortgage application volume has increased compared to last fall, it is still lower than last year. Experts anticipate a somewhat healthier spring market as temperatures increase in 2024, with inventory and home listings expected to grow.
Spring is traditionally a popular time to buy and sell homes for several reasons, including warmer weather, timing with the academic calendar, increased inventory, and favorable conditions for both buyers and sellers. However, this year’s spring market is different due to broader economic shifts, such as high inflation and surging mortgage rates. The housing market has seen a significant decline in affordability for the average homebuyer, with home sales dropping by roughly 25% over the past few years. Prospective buyers are being priced out of the market, and existing homeowners are hesitant to sell due to low mortgage rates.
Currently, sellers have the upper hand in the housing market due to shrinking housing supply. In many areas, there is more buyer demand than inventory, leading to a seller’s market with competitive conditions and multiple offers on homes. However, in some markets where supply has returned to pre-pandemic levels, buyers have more leverage in negotiations. Overall, housing supply remains low, with too many people chasing too few homes, according to experts.
While a significant drop in mortgage rates could lead to increased buyer and seller activity, the likelihood of 6% mortgage rates in the near future is keeping a lid on new listings this spring. Families who need to relocate or are tired of waiting on the sidelines are starting to adjust to the new normal of higher rates. Buyers are accepting the higher-rate environment and getting back into the market, knowing they have the option to refinance to a lower rate in the future.
Low inventory continues to impact home prices, with buyer demand outweighing existing supply and driving prices up. Despite an increase in new listings, the number of homes for sale is still lower than pre-pandemic levels, indicating that the market has not yet returned to normal. Ultimately, the decision of whether to buy a home this season depends on individual finances, goals, and timeline. Buyers can always refinance to a lower rate later if they find a home that meets their needs and budget, or they can take steps to improve their financial position for future home purchases.
