Pending home sales in May saw a decrease of 2.1%, as reported by the National Association of Realtors (NAR). This decline was marked by losses in transactions in the Midwest and South, while the Northeast and West noted slight increases. On a yearly basis, pending home sales have dropped across all U.S. regions.
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The Pending Home Sales Index (PHSI), a key indicator of future home sales based on contract signings, fell to 70.8 in May. This marks a 6.6% decline year over year. For context, a PHSI of 100 corresponds to the level of contract activity in 2001.
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  • Northeast: The PHSI rose by 1.1% from April to 63.6, yet it’s still down 2.3% from May 2023.
  • Midwest: The index fell 0.4% to 70.4 in May, a decrease of 5.6% from the previous year.
  • South: There was a significant drop of 5.5% to 83.7, with a yearly decline of 10.4%.
  • West: The index increased by 1.4% to 56.7, though it’s down 2.1% from last May.
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Market Dynamics: Rising Inventory, Lower Demand
The current market scenario is defined by an increase in inventory coupled with a decrease in demand. This balance suggests a potential easing in home price appreciation in the upcoming months. The influx of more homes in a job-creating economy is likely to spur greater home buying, especially if mortgage rates begin to decline.
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Economic Projections: Mortgage Rates and Home Sales
The NAR projects that mortgage rates will stay above 6% through 2024 and 2025, even with anticipated cuts to the federal funds rate by the Federal Reserve. Despite these high rates, existing-home sales are expected to rise, reaching 4.26 million in 2024 from 4.09 million in 2023, and further increasing to 4.92 million in 2025.
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Forecasted Trends in Housing Starts and Prices
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  • Housing Starts: Expected to rise to 1.382 million in 2024, up from 1.413 million in 2023, and to 1.492 million in 2025.
  • Median Existing-Home Prices: Predicted to hit a record annual high of $405,300 in 2024, up from $389,800 in 2023, and reaching $412,000 in 2025.
  • Median New-Home Prices: Forecasted to increase to $434,100 in 2024 from $428,600 in 2023, and to $441,200 in 2025.
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Looking Ahead: Market Expectations for the Second Half of 2024
The first half of the year did not align with expectations regarding home sales but surpassed projections related to home prices. As the year progresses, the market is expected to see:
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  • Moderately lower mortgage rates
  • Higher home sales
  • Stabilizing home prices
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These trends provide a cautiously optimistic outlook for the real estate market moving forward, suggesting a more balanced and potentially thriving housing sector.
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The real estate market is at a pivotal juncture, with rising inventory and fluctuating demand shaping future trends. Understanding these dynamics is crucial for construction business owners and industry stakeholders as they navigate the evolving landscape. The projected increases in home sales and prices, alongside potential shifts in mortgage rates, offer a roadmap for anticipating market movements and making informed decisions in the coming years.