Real Estate

Tepid Housing Market: June Prices Fall to $478,800, Refis Surge 39%

Home prices drop to $478,800 in June; purchase mortgage locks fall 8% year over year.

By Tal Alexander

7/10, 14:27 EDT

Key Takeaway

  • U.S. home prices fell for the first time in 2024, with June's average at $478,800, down $1,500 from May.
  • Purchase mortgage locks dropped 8% year-over-year despite a slight improvement in interest rates to 6.938%.
  • Refinances surged: rate-and-term refis up 39%, cash-out refis up 11%, indicating homeowners' response to inventory and affordability challenges.

Signs of a Stagnant Housing Market

In June 2024, the U.S. housing market exhibited signs of stagnation as home prices declined for the first time this year, and purchase mortgage locks fell by 8% year over year. According to the June 2024 Market Advantage report by Optimal Blue, the average home purchase price dropped to $478,800, down approximately $1,500 from May. Despite a slight improvement in interest rates, purchase activity remained subdued, reflecting ongoing inventory and affordability challenges. Brennan O’Connell, director of data solutions at Optimal Blue, highlighted that many homeowners with higher rates took the opportunity to refinance, even for minimal monthly payment reductions.

Refinancing Surge Amid Rate Decline

The decline in mortgage rates, which ended June at 6.938% for 30-year conforming loans, spurred a significant increase in refinancing activities. Rate-and-term refinances surged by 39% from May to June, while cash-out refinance activity rose by 11%. The average loan size in June slightly decreased to $374,200. Despite the overall drop in locked loan volumes across most metro areas, cities like Boston, Baltimore, Los Angeles, and San Francisco experienced less severe declines. Conforming loans made up 55.9% of all locks, although this share decreased by 2.5 percentage points compared to June 2023.

Broader Economic Context

The broader economic context, as provided by Citi's credit card data, indicates a continued decline in housing-related spending, which remained at -9.4% year over year in early July. This decline is attributed to consumers dialing back spending and trading down, with lower-income consumers struggling with durable product purchases. The University of Michigan's sentiment index also showed a significant decline among higher-income consumers. Despite these challenges, the National Association of Home Builders' Remodeler Market Index (RMI) remained positive, indicating cautious optimism for the second half of 2024.

Implications for the Housing Market

The stagnation in the housing market, coupled with the decline in housing-related spending, suggests a challenging environment for both homebuyers and sellers. The ongoing inventory and affordability issues are likely to persist, impacting consumer behavior and market dynamics. The increase in refinancing activities, driven by lower mortgage rates, indicates that homeowners are looking for ways to reduce their financial burdens. However, the overall decline in purchase activity highlights the need for more significant interventions to address the underlying issues in the housing market.

Street Views

  • Brennan O’Connell, Optimal Blue (Neutral on the housing market):

    "Despite an improvement in interest rates, purchase activity was subdued in June... This behavior speaks to the ongoing inventory and affordability challenges consumers are experiencing. As we look toward the back half of 2024 and the potential for rate relief from the Fed, purchase lock counts will provide insight into if and when production will turn the corner."