Expect the growth rate of existing home prices to cool down this year

I anticipated solid year-over-year home-price growth in today’s existing home sales report, so I’ve tried my best on social media to inform people that we have a low bar in home-price comps for this report and the next one. This is the context for why the home-price growth data was strong, which took some people by surprise.

As you can see below, even though home prices rose in 2023, the median sales price showed negative year-over-year growth in April, May and June of last year. So, it was necessary to highlight that for this report because our fresh current inventory data paints a different picture.

From NAR: The median existing home price for all housing types in April was $407,600, an increase of 5.7% from the previous year ($385,800). All four U.S. regions registered price gains.

Looking ahead, price growth will cool down in the second half of 2024 because of increased inventory and more homes taking a price cut before selling. As you can see above, starting in September of 2023, we saw steady year-over-year price growth increases in the data, making the year-over-year price comps harder this year.

The chart below shows that the inventory growth rate picked up more in 2024 after March. These sales will show up in the existing home sales later in the year.

So, unless mortgage rates drop fast and demand picks up, inventory should have an average year of growth before the seasonal decline. Looking at the chart above, inventory started growing late this year, but it seems normal compared to 2017-2019. This growth is a positive housing story in 2024, something I talked about on Yahoo Finance this morning.

From NAR: Total existing-home sales – completed transactions that include single-family homes, townhomes, condominiums and co-ops – slid 1.9% from March to a seasonally adjusted annual rate of 4.14 million in April. Year-over-year, sales fell 1.9% (down from 4.22 million in April 2023).

Existing home sales missed estimates, but the story here has been the same for some time; we have been working from the lowest sales levels since the bottom at the end of 2022, and we can’t grow sales in any meaningful way until rates go lower and stay there. We have had two times recently when mortgage rates dropped more than 1%. It gives us a boost in demand for a month or two, and then demand falls back. We had that happen this year in March, which forced me to question whether existing home sales had already peaked in 2024.

One difference between 2023 and 2024 is that this year the pending contract data shows small but steady year-over-year sales growth. The other data line that is small but steady year-over-year is the new listings data, and if most sellers are buyers, that gives us more demand than in 2023, when new listings were trending at the lowest levels ever.

I love that new listings data is growing yearly, but it’s been too light for me. We are getting close to the seasonal peak and then this data line will decline, making 2021-2024 the lowest new listings data period ever recorded in history.

Our weekly tracking data is months ahead of the existing home sales report, so we always give readers a heads-up. Last year, we had a different set of variables: The seasonal bottom in inventory started late on April 14, and new listings data was trending at the lowest levels ever all year. This isn’t the case in 2024. While inventory isn’t growing as fast as I thought it would, it’s still growing, which is positive for the housing market.