As we reach the height of summer, the real estate market in 2024 is showing signs of the typical seasonal slowdown that occurs during these warmer months. However, this year’s market has seen a more pronounced dip in activity than usual, raising questions about how factors like rising mortgage rates, inventory shortages, and shifting buyer sentiment are impacting both buyers and sellers. Traditionally, the summer months offer a brief reprieve from the frenetic pace of spring, but the extent to which the slowdown is affecting the market this year, especially in key regions like New York, California, and Florida, is worth examining.
The Summer Slowdown: Is It More Pronounced in 2024?
The summer season typically brings a dip in real estate activity, with fewer people moving forward with buying or selling during the heat of the year. However, in 2024, the market has seen a sharper decline in both buyer and seller activity than in previous years. Several factors are contributing to this extended lull, notably the continued high mortgage rates and persistent affordability concerns, which have created a more cautious environment for both buyers and sellers.
Rising mortgage rates, which remain around 7% for a 30-year fixed mortgage, continue to limit many buyers’ purchasing power. Higher monthly payments have pushed some potential buyers to delay their home search, while others have opted for rental properties or decided to wait until rates decrease. This behavior has contributed to a reduction in the number of homes being sold during the summer months, as the pool of buyers has shrunk.
For sellers, the summer months of 2024 have presented unique challenges. With fewer buyers actively searching for homes, some sellers have chosen to take their homes off the market or delay listing their properties altogether. Sellers who locked in lower mortgage rates in the past may be reluctant to sell and enter a higher-rate environment. As a result, inventory levels remain lower than expected, further contributing to the cooling market activity.
Regional Markets: New York, California, and Florida
New York: The New York housing market, which has been relatively stable in recent years, is experiencing some seasonal fluctuations typical of summer, but the expected slowdown in 2024 has been more noticeable. Mortgage rates have weighed on demand, especially in higher-priced areas of Manhattan and Brooklyn, where homes are already expensive. The reluctance of sellers to list properties during the summer months has left inventory in desirable neighborhoods low, though the limited supply has kept prices from dropping significantly. Activity remains slow, with many buyers opting to wait until the fall, hoping for a break in rates or more options on the market.
California: The California real estate market has been notably slower this summer compared to recent years, with a particular slowdown in expensive cities like Los Angeles, San Francisco, and San Diego. In cities like San Francisco, where prices had been high in 2023, buyers are more cautious this year. Mortgage rates at 7% have further discouraged potential homebuyers from entering the market. Buyers are being more selective, especially in areas where prices have reached unsustainable levels. With inventory low and few new listings coming to market, the summer slowdown has been in line with expectations, but its intensity is felt more in areas where affordability remains a significant issue.
Florida: Florida, which has long been a popular destination for both retirees and those migrating from higher-cost states, has seen some seasonal cooling during the summer. The state’s housing market has been driven by a robust influx of out-of-state buyers, particularly from places like New York and California, but this growth has slowed in 2024 due to rising mortgage rates. Cities like Miami, Orlando, and Tampa have seen some price adjustments, but demand remains strong compared to many other regions. However, the summer market has still experienced a dip in the number of transactions, as affordability concerns push more buyers to the sidelines. While Florida remains attractive due to its tax advantages, the rising cost of homeownership has made it more challenging for many to buy.
Inventory and Pricing Trends
Inventory continues to be a significant issue across the U.S., including in New York, California, and Florida. Despite the seasonal slowdown, many sellers are holding off on listing their homes due to the higher mortgage rates they would face when purchasing a new property. This lack of inventory is contributing to higher home prices, especially in markets like New York, where demand remains steady but the supply of available homes is scarce.
Nationally, home prices have continued to show moderate growth in the first half of 2024, but as we enter the summer months, the rate of increase has slowed. According to NAR and Freddie Mac, the median home price in July has increased by around 2-3% year-over-year, but this growth is not as robust as in previous years. In California, prices have leveled off as high mortgage rates have restrained demand, and in Florida, although prices continue to climb, the pace has slowed significantly in comparison to earlier in 2024. Similarly, Texas markets have seen steady but modest price increases as buyers are more hesitant to commit to higher borrowing costs.
For sellers, this summer has brought mixed results. In regions with severe inventory shortages, like much of California and Florida, sellers still have the upper hand, with homes typically selling faster and at higher prices compared to less competitive markets. However, in areas where price growth has plateaued or demand has softened, sellers may be forced to lower their expectations, especially as buyer caution persists during the summer months.
Outlook for the Fall Market
Looking ahead, the second half of 2024 is expected to see a gradual recovery from the summer slowdown, but much depends on how mortgage rates evolve in the coming months. If rates remain elevated, the market may continue to face affordability challenges, potentially extending the slowdown well into the fall. Buyers who have been hesitant to purchase may start to re-enter the market as they adapt to the reality of higher rates, but sellers will need to adjust their expectations accordingly.
Inventory levels are expected to increase as we move into the fall, as more sellers may feel compelled to list their homes after the summer lull. However, with mortgage rates remaining high, the number of buyers entering the market could remain subdued, especially for higher-priced homes. In markets like New York, California, and Florida, the second half of the year could see some stabilization, but competition for available homes will likely remain high in desirable areas where supply is still limited.
Conclusion: A Slower, Yet Strategic Market
The summer market slowdown in 2024 has been more pronounced than in previous years, as high mortgage rates and limited inventory have created a more cautious environment for both buyers and sellers. While the seasonal dip is in line with historical patterns, the effects of economic factors like affordability constraints are contributing to a longer period of reduced activity. Buyers and sellers alike are adjusting their expectations, with many choosing to wait until the fall for potentially better market conditions. As we head into the second half of the year, real estate professionals will need to remain flexible, guiding clients through a market that continues to be shaped by higher mortgage rates, limited housing inventory, and evolving buyer preferences.
