Window of stronger buyer demand lifted home prices. The median sale price of an existing single-family home surged to a record high of $405,600 in January 2024, after holding under $400,000 for the majority of the past two years. That month-overmonth growth was the largest since May 2022, a price escalation that was primarily a result of relatively lower interest rates encouraging some prospective buyers to move off the sidelines. The average 30-year fi xed-rate mortgage fell to 6.6 percent during January, representing an eight-month low and corresponding with the number of existing home sales strengthening to its highest point since August 2023. As of late February of this year, however, the average mortgage rate climbed back up to 6.9 percent amid the impact of stubborn infl ation on long-term bond yields. The combination of all-time-high home prices and renewed upward movement in debt costs could stymie home purchases near term.

Already wide aff ordability gap extends further. Prior to January’s home price swell and February’s interest rate upswing, the diff erence between an average eff ective apartment rent and a typical monthly mortgage payment on a median-priced home in the U.S. was at a record high. That aff ordability gap stood at roughly $1,300 at the onset of 2024, more than tripling from just two years ago. Cost-saving benefi ts of renting continue to bolster the appeal of apartments. While the sector is fi nding balance amid historic supply pressure, net absorption from October through December of last year was positive 43,000 units. As the fourth quarter is typically a soft period for apartment demand, this increase in occupied rentals refl ects recent momentum.

Home barriers and rental concessions infl uence behavior. The average new lease term at an apartment in the U.S. rose to 12.8 months in January 2024, the longest on record. The challenging single-family housing market is contributing to this, prompting households to prefer longer leases at apartments. A recent supply-induced increase in concessions may also be a factor. In January, roughly 12.2 percent of national apartments were off ering concessions, compared to 7.9 percent in the same month of 2023.

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* Home price as of January; Mortgage rate through Feb. 22 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