Housing Market Adapts to ‘New Normal’ of 6% Mortgage Rates

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Housing Momentum

In October, housing contract signings increased by 5.4% compared to last year, signaling continued momentum in the housing market. This marks the third consecutive month of growth in home sales, despite higher mortgage rates. “Homebuying momentum is building after nearly two years of suppressed home sales,” said Lawrence Yun, Chief Economist at the National Association of REALTORS® (NAR).

NAR also reported that existing-home sales saw their first yearly gain in over three years, increasing nearly 3%. Pending home sales rose 2% in October, with all four major U.S. regions showing growth. The Northeast led with a 5% increase, followed by the Midwest at 4%. The West saw the most significant year-over-year increase, up nearly 17%, underscoring the strength of the housing market in that region.

Yun attributes the market improvement to factors like more housing inventory and job growth, noting that prospective buyers are growing more comfortable with the new normal of mortgage rates around 6%. “Consumers are getting used to the higher rates and may be starting to accept 6%—or 7%—as the new normal,” he added.

The continued recovery of the housing market is also reflected in increasing buyer activity across regions. The Northeast and Midwest recorded notable gains in housing sales, while the West demonstrated remarkable year-over-year growth, highlighting the resilience of the housing sector despite financial challenges.

With higher mortgage rates becoming the norm, job growth and increased housing inventory are proving to be critical factors in sustaining buyer interest and supporting the ongoing recovery of the housing market.

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Update on the Portal Wars from Realtor.com

In a recent interview, Damian Eales, CEO of Realtor.com, discussed the company’s strategy for navigating the competitive landscape of real estate portals. Eales highlighted the importance of “fighting really well” and doing so “the right way” against rivals like Homes.com and Zillow.

Despite fierce competition, Eales sees Zillow as both a top competitor and an important partner in certain areas. For instance, Realtor.com partnered with Zillow on rental listings, seeing it as a strategic move to leverage Zillow’s scale rather than build a rental business independently. Eales also discussed the impact of the NAR’s Clear Cooperation Policy, noting that if it were repealed, Zillow could potentially benefit the most, though Zillow has publicly supported the policy.

Looking ahead, Eales emphasized the importance of Realtor.com’s brand and its ongoing commitment to supporting buyer agents across the country.

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 The affordability factor: Renting vs Buying

As rental prices continue to fall for the 15th straight month, many are questioning whether it makes more sense to rent or buy. According to Realtor.com’s October 2024 Rental Report, rental prices are down slightly to a median of $1,720 in major metros, but buying a home comes at a higher cost.

With a median home listing price of $425,950, the monthly mortgage payment would be around $2,229—about 30% more than the median rent. However, real estate experts caution that while renting offers short-term affordability and flexibility, buying a home allows for long-term wealth building.

Mike Roberts, co-founder of City Creek Mortgage, noted that while mortgage rates are higher than in recent years, “buying a home can still be a smart choice” due to the long-term benefits of homeownership, including building equity and the stability of a fixed-rate mortgage. Realtor.com economist Jiayi Xu advises potential buyers to use the Rent vs. Buy Calculator to evaluate their financial situation and determine whether homeownership is the right choice.

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