Despite widespread skepticism, home prices continue to move higher in 2024. February witnessed an unexpected surge in home prices, climbing by 0.6%, which is considerably higher than the typical seasonal February slowdown observed in previous years. The real estate market continues to deliver consistent appreciation, as indicated by the CoreLogic S&P Case-Shiller Index, which recorded a 6.4% year-over-year gain, marking its eighth consecutive month of annual increases (see Figure 1 below). This rebound in appreciation marks a robust start to the year, with home prices now 1.3% higher than their peak in June 2022.

RedFin recently published their Home Price Index as well, showing a similar gain of 0.62% for March. It looks like the first quarter of 2024 will come in surprisingly stronger than anticipated.

The main culprits behind the housing market strength are the demand from the massive Millennial generation (the largest since the Baby Boom generation) and the historically low housing inventory. Looking back to the 1980s, we see a national housing inventory of roughly two million homes for sale. Today, that number has fallen to approximately one million.

When analyzed from a simple supply and demand perspective, it’s clear why the widely anticipated housing crash hasn’t arrived and is unlikely to arrive anytime soon. Despite the appeal of rising home values, especially to homeowners, current high mortgage rates pose a significant challenge, testing the affordability limits for many potential buyers. However, with new listings experiencing a double-digit jump in many markets and pending home sales ticking 5% to 7% higher through March compared to last year, there are signs of gradual market improvement.

What This Means for Homeowners and Buyers
If you’re a homeowner or potential buyer, these figures represent a mix of challenges and opportunities. The rising prices can translate into significant equity gains for current homeowners, offering financial leverage or the possibility to invest further in the housing market. For buyers, the scenario demands strategic planning, which should include exploring payment reduction strategies like permanent and temporary mortgage rate buydowns.

Developing an Equity Transition Plan
For current homeowners, establishing an equity transition plan is crucial. This strategy involves understanding how to leverage your home’s equity growth effectively, whether you’re planning to upgrade, downsize, or even consider a reverse mortgage with no monthly mortgage payments as long as you reside in the home. It’s about making informed decisions that align with your long-term financial goals.

If you’re concerned about affording a new mortgage payment in this market, we recommend working with a mortgage advisor to develop an equity transition plan. The truth is, the reason most people feel stuck in their home today is not because of their low interest rate—it’s because they overlook their global household debt payment and fail to create a plan to use their current home equity wisely and effectively.

It’s a common misconception that when selling your home and buying a new one, all your existing equity should be used as the down payment to minimize your new mortgage. However, consider an alternative: using some of your equity to eliminate all your other debt, such as car loans and credit cards. This strategy reduces your global household debt payment, which can make buying a home much more affordable—even with a higher interest rate.

Creating an equity transition plan and finding a way to lower your global household debt payment is so crucial in today’s market. If you have significant home equity, putting less money down on your new home and instead paying off other debts can drastically improve your financial flexibility and affordability.

Ready to take the next step in your real estate journey? Contact us today to discuss how we can assist in developing your personalized equity transition plan, ensuring your success in today’s dynamic market.

Have questions? Lets chat! As always, we’re here and ready to help!

Tim Erickson
P: (652) 451-2273

Mark Henderson
P: (651) 398-3477