The U.S. housing market’s recession is over, Lawrence Yun, chief economist for the National Association of Realtors (NAR), said in a statement last week.

His statement accompanied a report that the number of signed contracts for home purchases grew by 0.3 percent in June, indicating that demand is still stronger than supply and that current mortgage rates are not shrinking the volume of sales. 

“The recovery has not taken place but the recession is over,” Yun said. “The presence of multiple offers [on each available home] implies that housing demand is not being satisfied due to lack of supply. Home builders are ramping up production and hiring workers.”

In June, the NAR’s index of homes under contract rose to 76.8, stronger than May but still 15.6 percent lower than a year earlier. A rating of 100 equals the number of purchase contracts signed in 2001 when the index was created.

Current interest rates are blamed, in part, for the relatively small number of homes for sale. Homeowners with low, pre-2022 rates locked in are reluctant to give them up to buy a new house that would carry a much more expensive mortgage.

The average national interest rate on a 30-year, fixed-rate mortgage was 7.23 percent on 31 July, Bankrate.com reported.

The NAR expects that rate to slip to 6.4 percent this year and 6 percent in 2024.

The U.S. Federal Reserve raised its rates again this month and might again in September.

However, “with consumer price inflation calming close to the [Fed’s]desired [2-percent target rate], mortgage rates look to have topped out,” Yun said. “Any meaningful decline in mortgage rates could lead to a rush of buyers later in the year and into next.”

Markets are pricing in expectations that the Fed will not raise its rates again this year and will begin cutting them in 2024.

TREND FORECAST: As we forecast more than a year ago, housing prices would fall but not crash. The shortage of homes for sale has kept buyers bidding against each other for the few available.

Beneath the headline, however, are the modest- and middle-income buyers that have been shut out of the housing market for the past three years. Also, since early 2020, first-time buyers have accounted for a smaller percentage of home sales than the historical average.

Lower interest rates will bring more of those frustrated would-be buyers into the market. However, home prices will remain elevated even then: demand will still outpace supply and many sellers will be unwilling to accept a price significantly lower than today’s boom time.