As we reach the midpoint of 2024, the real estate market is showing signs of both resilience and adjustment. Over the past few months, economic factors like high mortgage rates, inflation, and inventory shortages have continued to shape buyer behavior, price trends, and regional market activity. Despite these challenges, certain key markets, including California, Texas, and Florida, are maintaining momentum, while others are experiencing shifts. In this mid-year update, we will analyze the trends that have defined the first half of 2024 and offer insights into what the second half of the year may hold.
Buyer Behavior: Cautious Optimism Amid High Rates
One of the most significant factors influencing the real estate market in 2024 has been the continued presence of high mortgage rates. At the midpoint of the year, the average 30-year fixed-rate mortgage remains around 7%, which continues to limit many buyers’ purchasing power. Despite this, buyer activity has not come to a halt. Rather, prospective homebuyers are approaching the market with cautious optimism, with many taking a more calculated approach to their home search.
For many buyers, especially first-time homebuyers, affordability continues to be a challenge. Higher borrowing costs have prompted buyers to adjust their expectations, often looking for smaller homes, homes in less expensive areas, or properties in the suburbs rather than in city centers. In high-demand markets like California, Florida, and Texas, where inventory remains constrained, buyers are also becoming more strategic—acting quickly when desirable properties become available, but often facing stiff competition.
Interestingly, demand for rental properties has increased, particularly in regions like Texas and Florida, where people are still relocating in large numbers. This shift toward renting has been largely due to affordability concerns, as many buyers are opting to rent for a longer period until rates decrease or until they can better manage the higher cost of homeownership.
Price Trends: Moderate Growth Amid Challenges
In terms of pricing, the first half of 2024 has seen a continuation of the trends from 2023—home prices have remained relatively high, although the rate of price increases has slowed. According to data from NAR and Freddie Mac, home price growth has moderated, but prices are still rising year-over-year, particularly in high-demand markets. Nationally, home prices are up about 3-4% compared to the same period in 2023, signaling that while the market has slowed somewhat, strong demand continues to push prices upward.
The California housing market has remained a prime example of this trend, with cities like Los Angeles and San Francisco continuing to see price increases, though at a slower pace compared to previous years. These markets remain constrained due to limited supply and ongoing demand, driven by both migration patterns and job growth in industries like tech and entertainment.
Florida has seen continued growth in home prices, especially in cities like Miami, Tampa, and Orlando, as in-migration from higher-tax states remains strong. Buyers from New York, New Jersey, and California continue to flock to Florida for the lower cost of living and lack of state income tax, helping to sustain demand despite the higher mortgage rates. However, the rate of price increases is expected to decelerate slightly in the second half of 2024, as higher financing costs begin to cool some of the urgency among buyers.
Texas, particularly in markets like Austin, Dallas, and Houston, has also experienced continued price growth, although the pace of increases has slowed in comparison to the boom years. Texas’s strong job market and relatively affordable cost of living continue to attract new residents, especially in suburban and exurban areas, where home prices are rising more sharply. Still, the overall market in Texas remains more affordable compared to California and Florida, which helps sustain demand even in the face of high mortgage rates.
Inventory Levels: A Continued Struggle for Balance
Inventory levels continue to be a significant concern for the market in 2024, especially as we head into the summer months. While more homes are expected to be listed in the second half of the year as the market traditionally heats up, the overall number of available homes is still well below pre-pandemic levels. In fact, total housing inventory across the nation remains constrained, primarily due to the reluctance of current homeowners to sell their homes and lock in higher mortgage rates when they would be buying at a higher rate.
In regions like California and Florida, the inventory shortage is particularly acute. In California, where housing affordability has been a persistent issue, many homeowners are staying put, unwilling to sell and move into a higher-rate mortgage, further exacerbating the supply problem. Similarly, Florida’s booming market has led to a lack of available homes, especially in popular areas like Miami and Tampa, where demand is strong and inventory is limited.
Texas has also felt the strain of low inventory, though its relatively more affordable housing stock compared to California and Florida has kept demand stable. In Austin and Dallas, inventory has remained tight, but the market remains competitive due to the region’s robust economy and continued in-migration.
As the summer season progresses, real estate agents are expecting an uptick in listings, but even with more homes hitting the market, inventory will likely remain insufficient to meet demand, keeping home prices elevated in many areas. Sellers who are unwilling to list due to the current market conditions are contributing to the continued tight supply, although those who are motivated to move may be able to take advantage of the ongoing buyer competition.
Outlook for the Second Half of 2024: More of the Same, With Potential for Change
Looking ahead, the second half of 2024 is expected to follow the same patterns set in the first half. High mortgage rates will continue to dampen buyer enthusiasm for larger, more expensive homes, and inventory levels will remain low in many key markets. However, as the market adjusts to these conditions, some areas may begin to see stabilization, particularly in markets where prices have reached a plateau.
By mid-year, many buyers and sellers will have adjusted to the new market realities, and the demand for homes in key regions like California, Florida, and Texas will likely remain strong, even if the pace of sales slows somewhat. Buyers may become more strategic in their decisions, while sellers will continue to face competition, especially in highly desirable locations with limited supply.
Conclusion: Navigating a Balanced Market
The first half of 2024 has been a year of cautious optimism in the real estate market. While high mortgage rates and low inventory continue to pose challenges, the market remains active, with buyers and sellers adjusting to the economic environment. In regions like California, Florida, and Texas, home prices continue to rise, albeit at a slower pace, and inventory remains a key concern for both buyers and sellers. As we move into the second half of the year, the market will likely continue to experience moderate price growth, with regional variations and ongoing affordability challenges influencing buyer behavior and sales volume. Real estate professionals will need to stay attuned to these shifts, helping buyers and sellers navigate the evolving landscape effectively.
