As we move further into 2024, the national and local real estate markets exhibit resilience and potential for growth. While certain challenges such as elevated mortgage rates and economic uncertainties persist, positive trends in home equity, and strong demand in specific price segments suggest a favorable outlook.
National Home Price Trends
Homeowners across the United States experienced notable equity gains, with CoreLogic reporting a 9.6% increase in the first quarter. This represents the most significant increase since 2022.
Despite a slight decrease in year-over-year home price gains to 4.9% in May 2024, it was still the 148th consecutive month of annual growth. Nationally, total housing inventory grew 6.7% month-over-month to 1.28 million units heading into June, for a 3.7 months’ supply at the current sales pace, according to NAR. However, the increase in supply has yet to temper home prices, which have continued to rise nationwide. U.S. existing-home sales declined for the third consecutive month, as higher mortgage rates and rising sales prices hindered market activity during what has traditionally been one of the busiest months of the year.
Impact of Federal Policies and Interest Rates
In June, U.S. mortgage rates fell below 7% for the first time since March, prompting consecutive increases in financing applications for home purchases. The Mortgage Bankers Association (MBA) reported a 9% surge in purchase mortgage applications and a 28% rise in refinance applications compared to the previous week, being 28% higher than a year ago. Additionally, mortgage applications for new homes in May rose by 13.8% year-over-year, with sales reaching an annual rate of 702,000, the highest since last October.
After eleven rate hikes since March 2022, the Federal Reserve held rates steady at a range of 5.25% to 5.50%, marking the seventh consecutive meeting without a rate change. The Fed’s strategy aims to curb inflation, which has shown signs of slowing. Key economic indicators from the past week include a steady Federal Funds Rate, lower consumer inflation, improved wholesale inflation figures, and a significant rise in unemployment claims, reaching a 10-month high.
California’s Real Estate Market Performance
California continues to lead in real estate value in June, boasting the highest number of million-dollar home cities at 210, an increase of 12 from the previous year. The state remains a substantial wealth generator through real estate, despite its high taxes. Approximately 64% of homes listed are valued at $1 million or more, and 12% exceed $5 million. In 2023, the average California homeowner had over $634,000 in home equity.
San Diego Housing Market Dynamics
San Diego had the fastest rising home prices in the nation for a sixth month, but New York is nipping at its heels.
“Heading into summer, the market is at an all-time high, once again testing its resilience,” wrote Brian Luke, head of commodities, real and digital assets at S&P Dow Jones Indices. The pace of home price growth in San Diego, which includes all of San Diego County, appeared to be slowing. It was up around 11 percent annually from January to March, making the 10.3 percent rise a slight reduction — while still the highest in the nation.
The housing market showed mixed results in Q2 2024. Newly constructed residential home sales in the U.S. fell by 11.3% from the previous month, reaching an annual rate of 619,000 units, the lowest since November. Elevated mortgage rates were a significant factor in this decline.
Pending sales in San Diego dropped by 4.9% from July 2023 to June 2024. However, homes priced between $2,000,001 and $5,000,000 saw a 25.3% increase in sales. The median sales price rose by 9.3% to $880,000, with single-family homes experiencing a 10.9% increase to $1,020,000.
Overall, the U.S. housing market remains resilient despite rising mortgage rates and economic uncertainties, with notable regional variations and continued growth in high-value segments. Looking ahead, careful monitoring of market trends will be essential to navigate the evolving real estate landscape. San Diego, in particular, has seen the fastest rising home prices in the nation, though the growth pace appears to be slowing slightly. Increased inventory and rising median prices indicate a dynamic market poised for continued appreciation, making it an opportune time for strategic investments and market participation.
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