Welcome to today’s Real Estate news roundup! In this edition, we cover the latest updates and trends in the housing market. First, we explore the question on everyone’s mind: Is the housing market going to crash? Experts weigh in on the potential for a housing market crash amidst rising property prices and high mortgage rates. Next, we delve into the challenges of housing affordability in California, where new homes are not providing a quick solution due to their higher prices. We also highlight the rise of community land trusts in California, which have tripled in number since 2014, offering an alternative to building new affordable housing and helping to stabilize communities at risk of gentrification. Lastly, we provide an outlook for the housing market in 2024, discussing predictions of easing market conditions, dropping mortgage rates, and the potential impact of the “silver tsunami” as aging baby boomers transition out of their homes. Read on to stay informed about the latest developments in the real estate industry.
Is The Housing Market Going To Crash? | Bankrate
To the dismay of would-be homebuyers, property prices just keep rising. It seems nothing — not even some of the highest mortgage rates of the past two decades — can stop the continued climb of home prices. Are they destined for a fall? Here’s what the experts say about a potential housing market crash.
The U.S. housing market had finally started slowing in late 2022, and home prices seemed poised for a correction. But a strange thing happened on the way to the housing market crash: Home values started rising again. So much for the now-quaint notion that the post-pandemic “housing recession” would reverse some of the outsized price gains in homes.
Prices hit another new all-time high in June, according to the National Association of Realtors (NAR), which reports that median existing-home prices were up 4.1 percent over last year — the 12th month in a row of year-over-year jumps. June 2024’s median of $426,900 surpassed May’s record high of $419,300; before that, the record was $413,800, reached in June 2022. (Seasonal fluctuations in home prices typically make late spring the highest-priced time of the year.)
The main driver of record home prices is a one-two punch straight from Econ 101 — a lack of housing supply coupled with strong demand. Inventories have been growing but remain frustratingly tight, with NAR’s June data showing a 4.1-month supply. Not even high mortgage rates have slowed price appreciation. For instance, in October 2023, home values held steady even as mortgage rates soared to 8 percent, their highest level in more than 23 years. (They have since dipped, falling briefly below 7 percent before rising above it and then dipping below it again — the average in Bankrate’s weekly survey released July 24 was 6.90 percent.)
Despite prices being high, though, the actual volume of home sales has plunged, and inventories are still too low to meet demand. Homeowners who locked in 3 percent mortgage rates several years ago are declining to sell — and who can blame them, with current rates more than double that? — so the supply of homes for sale is staying tight. As a result, the correction will be nothing like the utter collapse of property prices during the Great Recession, when some housing markets experienced a 50 percent cratering of values.
All of that adds up to a consensus: Yes, home prices are pushing the bounds of affordability. But no, this boom shouldn’t end in bust.
New homes won’t cure California’s housing affordability problems
Buzz: Construction is not a quick cure for homebuying affordability headaches because the bulk of the new homes being built are pricier and larger than the rest of what’s sold on the market.
My trusty spreadsheet spied a Zillow study comparing existing residences sold in May with newly constructed ones in 46 big US metropolitan areas – including six in California.
Developers argue they need to build bigger homes to make the expensive land they buy, plus other construction costs, pencil out financially.
In California, buyers paid $1.14 million for new homes vs. $935,000 for existing ones. So what’s being built is 22% pricier.
Please note that this is not only a crazy California thing.
Nationally, new homes had a $418,000 median sales price vs. $365,000 existing – that’s 15% higher.
This is not just a greedy builder problem. In large part, these pricing gaps are the result of a host of policy and marketplace challenges that make it far easier to produce high-end housing.
There are no simple solutions to fix homebuying’s dramatic “unaffordability” problem. And relying on the easy answer – build what’s convenient – won’t work.
Helping California tenants stay put — community land trusts triple- CalMatters
California community land trusts, which buy land and sell or rent the buildings on it to low-income residents, have tripled in number since 2014. These trusts help preserve existing affordable housing and stabilize communities at risk of gentrification and displacement. The San Francisco Community Land Trust, for example, rented units back to tenants at affordable rates after crowdfunding $300,000 to purchase the Pigeon Palace building in San Francisco’s Mission neighborhood. Community land trusts can oversee single-family homes or multi-unit buildings, and residents can rent or own. The model offers an alternative to building new affordable housing and helps close the homeownership gap between Black and white individuals. While the movement faces challenges in raising capital, local funding streams and initiatives are being explored to support community land trusts.
2024 Housing Market Outlook: Trends and Predictions
After a challenging period of high mortgage rates and limited housing supply, there are signs that housing market conditions may ease somewhat throughout the rest of 2024. Home prices have continued to climb, creating affordability issues for homebuyers. However, experts predict that mortgage rates will drop, improving affordability for borrowers. Despite this, high demand and low housing supply are expected to keep home prices high and potentially push them up further. The “silver tsunami” of aging baby boomers transitioning out of their homes may contribute to increased housing supply in the coming years. To prepare for homeownership, it’s important to work on improving credit scores, exploring mortgage programs geared towards first-time buyers, and saving for down payments and closing costs. While timing the housing market perfectly is challenging, it’s essential to consider personal circumstances rather than waiting for the perfect opportunity. Overall, the 2024 housing market outlook suggests a tough market for buyers, but conditions may improve as rates drop and supply increases.