High mortgage interest rates continue to challenge the housing market  

Homebuyers are increasingly stretched to buy a home, and some existing homeowners are feeling the pressure of higher homeownership costs and missing their mortgage payments. Overall, there is more caution in the housing market as housing indicators continue to revert to pre-pandemic trends and both buyers and investors carefully evaluate their option.  

Here is where the current landscape stands right now: 

1. As of July 2024, the share of first-time home buyers (FTHB) remained around 37%, which is the same as the year prior. The share of U.S. FTHB applications surged to 39% in 2020, up from about 35% in 2019. However, the FTHBs share dropped to 34% during the third quarter of 2022, a three-year low, as mortgage rates at the time surged to the highest level in almost 25 years. The increase in the share of mortgage applications among the FTHBs since 2022 reflects fewer move-up buyers in markets as homeowners remain locked in with historically low mortgage rates.   

2. Loan-to-value (LTV) ratios have declined for both FTHBs and repeat buyers in recent years. The average LTV ratio was 89% for FTHBs and 79% for repeat buyers in 2024 (January to July), both categories dropped 2 percentage points from 2019. In contrast, average debt-to-income (DTI) ratios have steadily increased over the past few years due to the unprecedented surge in home prices. However, the average DTI ratio dropped slightly for the FTHBs in 2024 although it remained unchanged for the repeat buyers. 

3. The share of piggybacked FHA purchase loans rose by more than 7 percentage points, from 10.8% to 18% between June 2022 and June 2024. The percentage of piggybacked conventional loans was up from 2.2% in June 2022 to 3.6% as of June 2024. A growing number of homebuyers use second mortgages to help afford a home as low housing affordability continues to constrain homebuyers and disproportionately impact first-time homebuyers as well as those who are least able to afford a home.  

4. The number of homes sold in July rebounded from the large drop in June, and there was a 1.7% increase in sales compared to last July. July pending sales also hovered at 3% above last year, suggesting a small increase in sales for 2024 compared to last year.  

5. Overall active inventory continues to grow at a steady pace. In July it was about 15% above 2023 levels. With a 6% year-over-year increase in July, newly available weekly listings also continue to trend above 2023. The months of supply of unsold listings is now at 2.9 months.

6. There continues to be more buyers than sellers in many markets across the country, which is reflected in continued home price appreciation. The median list price and median sold price are both up 10% year over year in July. Similarly, some 31% of homes sold in July sold above the listed price. While the share of homes sold above listed price is down from the pandemic average of 52% in 2021 and 35% in 2022, this year’s share remains above the 2015-2019 average of 21% as of July.  

7. People are beginning to move back into bigger homes. The average living area of a home purchased in July increased to 1,885 square feet, up 2% from both July 2023 and July 2022, regaining the level seen in 2021. However, this square footage is down 2% from the 2020 number. Buyers’ shift to smaller homes was driven by affordability concerns, while the recent reversal could reflect a relative increase in purchases by higher-income households and more home sales activity in markets with larger homes, such as the South and the Southeast.  

8. Investors have continued to move away from flipping. CoreLogic’s investor purchase indicator data shows that only 12% of the homes investors purchased in December 2023 were resold by June 2024, which is notably lower than the historical December average of 17%. The combination of slower home price appreciation, buyer uncertainty, and high unaffordability has made flipping a more difficult and less attractive business model than it has been in recent years. 

9. The share of mortgages in delinquency increased to 3% in June, the highest rate since December 2023. The increase in the delinquency rate was driven by an increase in mortgages that were behind by one month. The increase was geographically widespread, with 97% of metropolitan areas showing an increase. However, a 3% delinquency rate is low by historical standards. For comparison, the delinquency rate was 4% in June 2019 and 12% during the height of the Great Recession of the mid-2000s. 

10. Nearly all borrowers (92%) currently hold a mortgage with a rate below 6.5%. Most borrowers with mortgage rates above 6.5% originated their loans within the last two years, and they will be likely refinancers as mortgage rates fall. The weighted average outstanding mortgage rate is 3.93%, the highest in four years, and the gap between the outstanding mortgage rate and the prevailing 30-year-mortgage rate shrank to 2.9 percentage points from a high of 3.9 percentage points in October 2023.