Housing Market: Builders Forge Ahead As Buyers Enter 'Acceptance Phase' On Rates
Friday, Jan 17, 2025 1:01 pm ET
1min read As the housing market navigates through a period of higher mortgage rates, builders are adapting their strategies to cater to buyers who have entered the 'acceptance phase.' This phase is characterized by buyers becoming accustomed to the new normal of higher prices and mortgage rates, leading to a moderate growth in existing home sales. However, if mortgage rates decline, transactions could surge, unleashing pent-up demand and potentially driving up prices.
According to the U.S. News Housing Market Index, home sales are expected to remain low as long as mortgage rates remain well over the 6% level. This is due to the fact that higher mortgage rates make homes less affordable, discouraging potential buyers from entering the market. However, if mortgage rates manage to fall faster than expected, pent-up demand could be unleashed, leading to a surge in transactions and potentially driving up prices.
New policies on real estate commissions and the sharing of home listings on public MLS systems are likely to vary between regions before revamped national rules are enforced. This regional variation in policies could impact the housing market's trajectory, as it may affect affordability and buyer activity in different regions.
Newly built homes will continue to fill in the supply gaps created by the lack of existing home inventory, especially by homebuilders who can buy down mortgage rates. This is because new home construction can help increase the overall housing supply, which can help alleviate the inventory shortage and make homes more affordable for buyers. Additionally, new home construction can also help create jobs and stimulate economic growth in the housing sector.
However, regional variations in mortgage rates and home prices can significantly impact the housing market's trajectory. For instance, in the Southwest, mortgage rates are expected to ease, making homes more affordable and favoring buyers. In contrast, in regions like the Midwest and South, affordability has already improved, creating buyer's markets. These regional differences can lead to varying market dynamics, with some regions experiencing increased buyer activity while others may see a slowdown.
In conclusion, as buyers enter the 'acceptance phase' of higher mortgage rates, builders are adapting their strategies to cater to this new market reality. New home construction will play a significant role in addressing the existing home inventory shortage, while regional variations in mortgage rates and home prices can impact the housing market's trajectory. Understanding these regional differences is crucial for predicting the market's future and making informed decisions.
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