Home Buyer Opportunities Appear to be Opening Up

Although more homes are available for sale, home buyers are not in a rush. Pending home sales fell by 2.1% in May and are down nearly 7% compared to a year ago when housing options were more limited, according to the National Association of REALTORS®’ (NAR) newly released Pending Home Sales Index, which is a forward-looking indicator of home sales based on contract signings.

“The market is at an interesting point with rising inventory and lower demand,” says NAR Chief Economist Lawrence Yun. Total housing inventory at the end of May was up nearly 19% compared to a year ago, according to NAR’s latest existing-home sales report.

“Supply and demand movements suggest easing home price appreciation in the coming months,” Yun says. In May, the median existing-home sales price surged to a record high of $419,300, NAR reports.

The drop in home sales last month may have been due to higher home prices and a surge in mortgage rates, which exceeded 7% in May. Sales of newly built single-family homes fell 11.3% in May, reaching the lowest pace since November 2023. Home builders attributed the sudden sales contraction to high mortgage rates.

“Persistently high mortgage rates in May kept many prospective buyers on the sidelines,” says Carl Harris, chairman of the National Association of Home Builders. “However, significant unmet demand exists, and we expect mortgage rates to moderate in the coming months, which will bring more buyers into the market.”

Mortgage rates have since decreased from their recent highs of 7%. NAR predicts that rates will likely remain above 6% in 2024 and 2025.

Great Expectations for Sales and Home Prices

Despite recent fluctuations, economists predict a robust housing market for this year and next.

“The first half of the year did not meet expectations for home sales but exceeded expectations for home prices,” Yun says. “In the second half of 2024, expect moderately lower mortgage rates, higher home sales, and stabilizing home prices.”

NAR has released its latest outlook for 2024 and 2025:

Existing-Home Sales Forecast

• 2024: 4.26 million (up from 4.09 million in 2023)
• 2025: 4.92 million

Housing Starts Forecast

• 2024: 1.38 million (down from 1.41 million in 2023)
• 2025: 1.49 million

Median Existing-Home Prices Forecast

• 2024: $405,300 (up from $389,800 in 2023)—reaching a record annual high
• 2025: $412,000

Median New-Home Price Forecast

• 2024: $434,100 (up from $428,600 in 2023)
• 2025: $441,200