The current start-stop cycle facing American homebuyers and sellers shows no sign of relenting.
The cycle continued in May, as inflation eased more than expected, dropping to 3.3% from the 3.4% annual increases seen in March and April. These positive signs were followed by a long-awaited dip in mortgage rates, which fell for four consecutive weeks through the end of June. However, despite this decrease in rates, they remain elevated. In combination with high rates, supply constraints continue to result in high housing costs, placing further pressure on affordability.
Americans continue to grapple with these fluctuating economic indicators, making the decision to buy or sell a home an enduring challenge, barring a life event forcing a transaction. This volatility has sidelined many potential buyers and sellers, who are opting to wait for a more stable market.
What Americans need is stability in place of this stop-start cycle. Stable mortgage rates – even if they remain relatively elevated – could be the key to unlocking confidence in the housing market.
What variables are shaping, and shaking, the housing market?
The instability in the housing market is evident in existing-home sales and home builder sentiment. In May, the National Association of Realtors (NAR) reported a 0.7% decrease in existing-home sales, with a 2.8% year-over-year decline. Additionally, pending home sales in April dropped 7.7%, and year-over-year pending transactions fell 7.4%, indicating a persistent trend.
Construction remains insufficient to meet demand after 15 years of under-building. In fact, new housing starts faced a 5.5% monthly decrease and a 19.3% annual decline in May. All three components of the National Association of Home Builders Housing Market Index (HMI), which measures builder confidence in the market for new single-family homes, was 43 in June, down two points from the previous month. In fact, all three HMI components posted declines in June, and all are below the key threshold of 50 for the first time since December 2023.
This lack of confidence is driven by the Federal Reserve’s signals that it will consider only one potential interest rate cut this year, as well as stalled progress in reducing inflation and consistently high construction costs. For consumers to be more comfortable in making the significant decision to buy a home, they need stability.
Life goes on
The housing market’s constant state of flux can feel overwhelming, but you don’t have to navigate it alone – especially if the time is right for you to buy or sell. A trusted real estate professional, with their expertise in crafting personalized strategies and negotiating on your behalf, can guide you through the complexities of the transaction and provide assurance that you’re making the best decision for your future.
While affordability challenges are real, waiting for the “perfect” market moment might not be the best strategy. A real estate professional can be your partner, helping you navigate these challenges and find the right home at the right time.
Buying a home is one of the most significant and meaningful long-term investments one can make. It is a cornerstone of personal stability and fulfillment. We need to ensure that this process is as stable and anxiety-free as possible, so that more Americans can confidently step into homeownership and build the lives they envision.
Jason Waugh is the president of Coldwell Banker Affiliates.
This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.
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