“May 20, 2024: Key Updates in the Housing Market – NAHB Index, New Construction Trends, and 2024 Market Predictions”

Welcome to today’s real estate news roundup, where we delve into the latest trends and forecasts that are shaping the housing market. From the intricacies of the NAHB/Wells Fargo Housing Market Index to groundbreaking legal settlements and economic predictions, we cover the vital information that homeowners, buyers, and industry professionals need to navigate this dynamic field. Stay informed with our comprehensive analysis and explore how these developments might impact your real estate decisions.

NAHB/Wells Fargo Housing Market Index (HMI) | NAHB

The NAHB/Wells Fargo Housing Market Index (HMI) is based on a monthly survey of NAHB members designed to take the pulse of the single-family housing market. The survey asks respondents to rate market conditions for the sale of new homes at the present time and in the next six months as well as the traffic of prospective buyers of new homes.

The NAHB/Wells Fargo HMI is a weighted average of three separate component indices: Present Single-Family Sales, Single-Family Sales for the Next Six Months, and Traffic of Prospective Buyers. Each month, a panel of builders rates the first two on a scale of “good,” “fair” or “poor” and the last on a scale of “high to very high,” “average” or “low to very low”. An index is calculated for each series by applying the formula “(good – poor + 100)/2” or, for Traffic, “(high/very high – low/very low + 100)/2”.

Each resulting index is first seasonally adjusted, then weighted to produce the HMI. The weights are .5920 for Present Sales, .1358 for Sales for the Next Six Months, and .2722 for Traffic. The weights were chosen to maximize the correlation with starts through the following six months.

The HMI can range between 0 and 100.

View the release date of each HMI in 2024.

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Housing Market Predictions For 2024: When Will Home Prices Be Affordable Again? – Forbes Advisor

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Updated: May 16, 2024, 12:45pm

Thanks primarily to an unexpected rise in mortgage rates, which exacerbated affordability challenges, the spring home-buying season has yet to spring to life.

Though newly built home sales are thriving, sales of existing homes, which comprise the lion’s share of the housing market, have stagnated. On the bright side, tepid demand for existing homes is helping boost the country’s low housing supply.

Meanwhile, the home purchasing process edged closer to a colossal shift. In April, a judge preliminarily approved the landmark $418 million real estate broker commissions settlement centering on the National Association of Realtors (NAR). The new rules mandating significant changes to the industry’s long-standing buying and selling model will begin in July.

The further rise of already-elevated mortgage rates and home prices in the past few weeks amid a prolonged inventory shortage has dampened the hopes of many prospective buyers.

Yet, despite ongoing affordability hurdles, Fannie Mae forecasts an increase in home sales transactions compared to last year. Experts also anticipate a slower increase in home prices over the course of 2024 compared to recent years. However, price fluctuations will continue to vary regionally and depend strongly on local market supply.

Meanwhile, U.S. home prices posted an annual 6.4% gain in February—the eighth consecutive month of year-over-year increases and the fastest annual rate since November 2022—according to the latest S&P CoreLogic Case-Shiller Home Price Index. Home prices are at or near all-time highs.

Despite the recent run-up in mortgage rates, the month-over-month home price index rose by a robust 0.6%. By comparison, month-over-month index gains averaged 0.2% between 2015 and 2019, according to Selma Hepp, chief economist at CoreLogic.

For a housing recovery to occur, several conditions must unfold.

“For the best possible outcome, we’d first need to see inventories of homes for sale turn considerably higher,” says Keith Gumbinger, vice president at online mortgage company HSH.com. “This additional inventory, in turn, would ease the upward pressure on home prices, leveling them off or perhaps helping them to settle back somewhat from peak or near-peak levels.”

And, of course, mortgage rates would need to cool off, but the timeline for that development seems to be getting more protracted now that rates have blown past 7%. For the week ending May 16, the 30-year fixed mortgage was 7.02%.

However, when mortgage rates finally go on the descent, Gumbinger says don’t hope they cool too quickly. Rapidly falling rates could create a surge of demand that wipes away any inventory gains, causing home prices to rebound.

“Better that rate reductions happen at a metered pace, incrementally improving buyer opportunities over a stretch of time, rather than all at once,” Gumbinger says.

He adds that mortgage rates returning to a more “normal” upper 4% to lower 5% range would also help the housing market, over time, return to 2014-2019 levels. Yet, Gumbinger predicts it could be a while before we return to those rates.

Nonetheless, Kuba Jewgieniew, CEO of Realty ONE Group, a real estate brokerage company, is optimistic about a recovery this year.

“e’re definitely looking forward to a better housing market in 2024 as interest rates start to settle around 6% or even lower,” says Jewgieniew

Following years of litigation, the NAR has agreed to pay $418 million to settle a series of high-profile antitrust lawsuits filed in 2019 on behalf of home sellers. A federal judge granted preliminary approval for the settlement in April.

The plaintiffs claimed that the leading national trade association for real estate brokers and agents “conspired to require home sellers to pay the broker representing the buyer of their homes in violation of federal antitrust law.”

Though a final approval hearing is not scheduled until November, required practice changes laid out in the agreement will go into effect beginning August 17, according to a NAR press release.

The settlement requires NAR to enact new rules, including prohibiting offers of broker compensation on multiple listing services (MLS), the private databases that allow local real estate brokers to publish and share information about residential property listings.

Moreover, sellers will no longer be responsible for paying buyer broker commissions—upending an accepted practice that has been in place for years—and real estate agents participating in the MLS must establish written representation agreements with buyers.

NAR denies any wrongdoing and maintains that its current policies benefit buyers and sellers. The organization believes it’s not liable for seller claims related to broker commissions, stating that it has never set commissions and that commissions have always been negotiable.

If you sold a home in the past ten years, you may be eligible for a small piece of this settlement pie. Visit realestatecommissionlitigation.com for more information about filing a claim.

Per NAR’s settlement terms, the costs associated with buying and selling a home are set to change dramatically.

“The primary things that will change are the decoupling of the seller commission and the buyer commission in the MLS,” says Rita Gibbs, a Realtor at Realty One Group Integrity in Tucson. “It’s gonna cause some chaos.”

While sellers will no longer be able to offer broker compensation in the MLS, there’s no rule prohibiting off-MLS negotiations. Because of this, Gibbs suspects buyers and sellers will continue offering broker compensation off the MLS.

The Department of Justice confirmed it will permit listing brokers to display compensation details on their websites. However, buyer agents will need to undergo the tedious task of visiting countless broker websites to find who’s offering what.

Michael Gorkowski, a Virginia-based real estate agent with Compass, is also trying to figure out how to manage the potential ruling.

“We often work with buyers for many months and sometimes years before they find exactly what they’re looking for,” Gorkowski says. “So in a case where a seller isn’t offering a co-broker commission, we will have to negotiate that the buyer pays an agreed-upon commission prior to starting their search.”

“In the short term, it is absolutely going to injure buyers, especially FHA and VA buyers,” Gibbs says. “With rare exception, these buyers are not in a position to pay for their own agent.”

Gibbs says that if sellers don’t offer compensation, many buyers who can’t otherwise afford to pay a broker will choose to go unrepresented.

Gorkowski notes that veterans taking out VA loans face a unique challenge under the new rules. “er the VA requirements, buyers cannot pay so it must be negotiated with the seller for now.”

As a result, NAR is calling on the VA to revise its policies prohibiting VA buyers from paying broker commissions. Meanwhile, the VA is discussing foreseen issues with the Department of Justice to ensure the new practices do not disadvantage VA home buyers.

Even so, there is skepticism that the federal government will be able to implement changes by the July deadline.

Gibbs and Gorkowski are among the many agents especially concerned about first-time home buyers. After July, first-time will be required to sign a buyer-broker agreement stating that they will compensate their broker—but Gibbs says many won’t have the means to do so.

In this situation, agents would likely only show buyers homes where sellers are offering compensation.

“This is a very troubling situation,” Gorkowski says.

Many homeowners remain “locked in” at ultra-low mortgage rates, unwilling to exchange for a higher rate in a high-priced housing market. Consequently, demand continues to outpace housing supply—and likely will for a while—even as more homeowners begin to sell.

“I don’t expect to see a meaningful increase in the supply of existing homes for sale until mortgage rates are back down in the low 5% range, so probably not in 2024,” says Rick Sharga, founder and CEO of CJ Patrick Company, a market intelligence and business advisory firm.

Housing stock remains near historic lows—especially entry-level supply—which has propped up demand and sustained ultra-high home prices. Here’s what the latest home values look like around the country.

The most recent National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), which tracks builder sentiment, remained flat at 51 in April. A reading of 50 or above means more builders see good conditions ahead for new construction.

Meanwhile, permits for new single-family homes dipped to their lowest rate since October, slumping 5.7% in March, according to the latest data from the U.S. Census Bureau and U.S. Department of Housing and Urban Development (HUD). This decline breaks a 13-month streak of increases.

Single‐family housing starts also