May Market Update 2024

Market Update

May Market Update 2024
The average 30-year mortgage rate began the year at 6.62%, marking the start of the third year mortgage rates have been elevated. However, the rate expectations for 2024 in January were far different from those today. In January, inflation was still trending lower and economists were predicting rate cuts as early as March. Unfortunately, the inflation rate stopped falling around 3% causing the Feds to hold off on rate cuts.
 
In April, mortgage rates rose nearly a half a percentage point due to changing Fed expectations, hitting the highest level yet in 2024. The Fed has expressed that inflation is taking longer to settle at 2% than originally expected, so higher rates will likely be here for most — if not all — of 2024.
 
Demand is still high relative to supply, even though inventory is growing. However, as prices increase, the buyers who haven’t been priced out of the market become pickier, and fewer but pickier buyers creates an overall slowdown. The market was showing signs of a more normal spring with sales and inventory rising, but the recent rate increases dropped national sales last month, which is almost never seen in the spring. Mortgage rates above 7% will naturally give potential buyers and sellers pause before entering the housing market.
 

Local Lowdown

 
In the East Bay, low inventory and high demand have more than offset the downward price pressure from higher mortgage rates, and prices generally haven’t experienced larger drops due to higher mortgage rates. Year over year, prices were up 15% in Alameda and 4% in Contra Costa. Low, but rising inventory is only increasing prices as buyers are better able to find the best match.
 
High mortgage rates soften both supply and demand, but homebuyers seemed to tolerate rates above 6%. Now that rates are above 7%, sales may slow slightly in the next couple of months, but it may allow inventory to build in a massively undersupplied market.
 
With the current inventory levels, the number of new listings coming to market is a significant predictor of sales. New listings rose 25% month over month, and sales followed suit, increasing 26%. Year over year, inventory is up 24%, and sales are up 17%. Demand is clearly high in the East Bay, but more supply is needed for a healthier market.
 
As always, Arrive Real Estate Group remains committed to helping our clients achieve their current and future real estate goals. Our team of experienced professionals are happy to discuss the information we’ve shared in this newsletter. We welcome you to contact us with any questions about the current market or to request an evaluation of your home.

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