More prospective buyers and sellers coming to terms. The number of existing single-family homes available for purchase swelled to a 40-month high in February 2024, reaching a level not seen since late 2020 and providing prospective buyers with new opportunities. Along with this increase of homes on the market, the pace of sales escalated in February to the strongest measure since the same month of 2023. These improvements occurred despite the persistent obstacles of elevated borrowing costs, with the average 30-year fixed-rate mortgage remaining in the upper-6 percent zone through the second half of March. Over much of the past two years, this environment has discouraged owners with lower rate mortgages from selling homes, while also creating historic affordability barriers for prospective buyers. These roadblocks remain in place going forward; however, recent trends imply that the U.S. housing market is starting to loosen.

All-time high home prices incentivizing sell-side activity. Amid stronger homebuying trends in February, the median sale price of an existing single-family house in the U.S. also rose to a new record high of $406,700, up nearly 6 percent year-over-year. This appreciation is contributing to the uptick in home listings, persuading some owners to reconsider selling their property. At the same time, rising values continue to reinforce the affordability challenges first-time homebuyers are facing. The appeal of higher-end apartments, meanwhile, is growing. Based on preliminary data, renewal rates at Class A rental units hit a five-month high in February 2024, while new lease applications at luxury apartments have also been on the rise to start this year.

Despite improvements, home availability trails modern norms. While the number of existing homes available for purchase surged to its highest mark since November 2020, the measure remained well-short of pre-pandemic years. In February 2024, roughly 1.1 million houses were listed on the market, compared to an average of nearly 2.2 million homes from 2000-2019. This shortfall could keep valuations elevated and counterbalance potential interest rate relief expected over the medium term.

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* As of February Sources: Marcus & Millichap Research Services; Capital Economics; Freddie Mac; Moody’s Analytics; Mortgage Bankers Association; National Association of Home Builders; National Association of Realtors; RealPage, Inc.; U.S. Bureau of Labor Statistics; U.S. Census Bureau; Wells Fargo