Rows of suburban homes

The housing market is 'stuck' — maybe for a while 

While interest rates continue to edge down, sales have not picked up heading into summer: “This will take many years to work itself out.”

June 27, 2024
3 minutes

Key points:

  • The 30-year fixed-rate mortgage rate dipped just .01 percentage point this week, averaging 6.86%.
  • Pending home sales dropped 2.1% in May, while new home sales plummeted.
  • Bank of America economists say “there isn’t a magic fix” for the housing market, and it could remain “stuck” until 2026 or later.

It appears the housing market is going to remain stuck in neutral much longer than anyone could have predicted back when interest rates first started rising two years ago.

The latest economic data shows more stagnation: The 30-year fixed-rate mortgage was basically unchanged this week, averaging 6.86%, a .01 percentage point drop from the week before according to the latest Freddie Mac survey. The 15-year rate rose slightly to 6.16%.

Pending home sales dropped 2.1% in May, with the National Association of Realtors now forecasting home sales to be at 4.26 million in 2024. Its Pending Homes Sales Index, which is a forward-looking indicator based on contract signings, dropped to 70.8, the second-lowest level in the history of the index, said Hannah Jones,'s senior economic research analyst.

And sales of new homes also slowed in May, falling 16.5% year-over-year.

"The first half of the year did not meet expectations regarding home sales but exceeded expectations related to home prices," said Lawrence Yun, NAR's chief economist. But Yun believes the tide could be turning: "In the second half of 2024, look for moderately lower mortgage rates, higher home sales and stabilizing home prices."

Stuck until 2026?

Others are not as optimistic about a bounce back in sales. Economists at Bank of America warned that the U.S. housing market may not become "unstuck" until 2026 or later, according to a report from CNN.

"This will take many years to work itself out. There isn't a magic fix," Michael Gapen, head of U.S. economics at Bank of America, told CNN in a phone interview. "The message for first-time homebuyers is one of patience and frustration."

Getting back into gear will likely depend on mortgage rates. While this week's average was hardly much of a drop, rates are now at the lowest level in nearly three months. Freddie Mac expects rates to continue to fall during the summer months, which could bring additional buyers into the market, said Sam Khater, the organization's chief economist.

Another low inflation reading this month could also signal a trend. The next indication of where inflation is going will come on Friday with the latest Personal Consumption Expenditure Price Index. That index seems to be the Federal Reserve's preferred inflation measure when making monetary policy decisions, said Economist Jiayi Xu.

As mortgage rates have edged down, applications have increased slightly, according to the Mortgage Bankers Association. The seasonally adjusted rate for mortgage purchase loans rose 1%.

What about home prices?

While median home prices have risen in the first half of 2024, the pace may be slowing. Redfin's latest four-week rolling market report found that the typical U.S. home sold for 0.3% less than its asking price — something that hasn't happened during this time of year since the beginning of the pandemic in 2020.

"The growing likelihood that homes sell below asking price, along with the high share of sellers dropping their prices, could mean sale-price growth loses momentum," according to the report.

Redfin's four-week average for active listings was up nearly 17% compared to a year ago. New listings are up 8.2% year-over-year as well.

"If mortgage rates continue their descent alongside rising inventory levels, some buyers may be enticed off the sidelines and boost the summer home-buying season," said Odeta Kushi, First American's deputy chief economist. 

"Nevertheless, a robust summer recovery is unlikely given ongoing affordability constraints."

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