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Spring is usually a good time to buy and sell a home. Not this year. Just like 2023, it is filled with uncertainty. The price of a new home is still sky high, there’s a lack of inventory and even though building has picked up, mortgage rates are making the American dream difficult unless you won the lottery.

After a dramatic increase in 2022, the average price of a new home dropped slightly in 2023 from $540,000 to $511,100. It has dropped even more, but according to the National Association of Realtors (NAR) the predicted median home price will rise 1.4% to $395,100 in 2024, and then another 2.6 percent to $405,200 in 2025.

Despite all these headwinds, builders are optimistic because of consumer demand. 80% of builders anticipate starting more homes this year, and 51% expect starts to increase more than 10% compared to 2023, Ali Wolf, chief economist with housing research firm Zonda, said.

Inflation

Today’s mortgage rates remain stubbornly high despite lower inflation. The current average 30-year fixed mortgage rate is 7.09 percent, according to Bankrate’s most recent data.

Many people have put off the buying a new home and are now renovating, restoring, or remodeling their current houses. According to Screenmobile, the house restoration firm, U.S. home renovation business accounts for well over $400 billion in annual revenue and is projected to reach $510 billion this year.

These homeowners are “locked in” at low interest rates and unwilling to sell due to higher home and mortgage prices, so demand continues to outpace housing supply.

Lack of Inventory

Home buyers who have been frustrated by a lack of inventory are looking to builders for more housing options. Builders are answering buyers’ affordability concerns with sales incentives, like buying down mortgage rates or assistance with closing costs, according to Melissa Tracey at Realtor Magazine.

Townhomes

Townhome construction surged to its highest rate in more than 17 years. The single-family attached housing style, which often comes with a lower price tag, has become a viable option. Overall, townhouses accounted for nearly 20% of the total housing starts in the final quarter of 2023.

“The townhouse market is one of the bright spots in the new-home sector,” said Robert Dietz, chief economist of the National Association of Home Builders. This sector continues to outperform with a growing number of home buyers—young and old—who are looking for medium-density residential neighborhoods. In Florida, big corporate contractors like Lennar are building townhomes like they’re going out of style.

Mortgage Rates

Mortgage rates are expected to decline later this year as the U.S. economy weakens, inflation slows and the Federal Reserve cuts interest rates. The 30-year fixed mortgage rate is expected to fall to the low 6% range through the end of 2024, dipping into high 5% territory by early 2025.

Time To Buy?

Still have spring home fever? If you have good credit, a big down payment, and you can find a home in a town you like, go ahead, spring for it!

Here’s some good advice. A real estate agent can help you navigate through these turbulent times. You get a high-quality, up to date list of real estate agents targeted to your specific market by going to the Email List Company, the #1 trusted source for real estate agent lists for over 20 years.