The US real estate market is a strange entity indeed. Apparently, it has a life of its own. And while we can forecast its future for 2024, there’s no such thing as one hundred percent certainty. So, take every “reliable” source and the information published therein with a pinch of salt.
Will the American real estate market be out of the woods this year? Though it’s far from a complete recovery, we firmly believe it’s on the right track. Easier said than done? In the last couple of years, homebuyers have been disheartened by high-interest rates and low housing inventory, driving up property prices by about 27 percent since the pandemic (which we’ll cover later in this article).
Editor’s Note! This piece of intriguing news just came in on March 11th, 2024. President Biden intends to grant first-time homebuyers a $10,000 tax credit! And what about sellers? They will also be given a $10,000 tax credit to facilitate selling their starter home and moving to a more spacious one. Many homeowners benefited from low-mortgage rates during the pandemic. Until now, they have hesitated to change their residency because they wouldn’t get the same advantageous rates if they wished to buy a bigger house.
Let’s get things straight, though! As of today, the motion to lower the expenses of buying a home is only a proposal, and Congress must enact it first. Is affordable housing finally one step closer? Time will tell. Stay tuned!
Table of Contents
- Let’s start 2024 positively regarding your housing projects!
- What happened to the American housing market in 2023?
- How did mortgage rates affect low inventory?
- What everything boils down to in 2024 – Interest rate forecast
- Interested in home prices? Read between the lines!
- The supply saga continues, though there’s a twist.
- Location, location, and… remote work?
Let’s start 2024 positively regarding your housing projects!
The US housing market in 2024 looks set to be a roller coaster. But hold onto your hats! There’s more to explore in this journey! Keeping our language simple and insights crisp, let’s dive deeper into what’s brewing. We have the data to prove the market won’t limp as 2023 might have indicated. Therefore, there’s no need to postpone your home selling or buying projects indefinitely!
Instead of giving in to fears and dismay, we suggest you find a real estate agent. They can deliver a fresh take on investing in residential and commercial assets for sale in your neighborhood!
In Q1 2024, the buzzwords are high interest rates, lacking inventory, and elevated property prices. Let’s see how these affect your plans!
What happened to the American housing market in 2023?
To put it bluntly, the US housing market came to a screeching halt the previous year. Most prominently, the FED action triggered this market freeze by adapting the 7 percent interest rate. Mortgage rates catapulting into unprecedented heights led many analysts to believe “the real estate coffin” was buried six feet deeper. However, many other components contributed to the market’s downfall.
Is the inventory shortage such a big deal?
Yes, it is. Simply put, we need more homes to meet the demand. The number of households is also growing. Did you know this shortage affected Los Angeles (with a deficit of about 605,000 units) and New York City (a deficit of 805,000) in 2022? After a growing housing supply in the 2000s, the 2010s brought a home deficit, which escalated quickly. In 2022, the American housing market was about 3.2 million units shorter. No wonder prices went haywire.
No one can deny that low inventory was also to blame for our present plight. For decades in US history, we haven’t seen such a fragile real estate market, chronically low in activity. Not even the most infamous recessions could put a kill switch to buying and selling homes to such an extent!
Homeownership became a distant dream for many. Albeit, the dying market struck not only potential buyers and investors. Despite the ongoing inflation, sellers also had to rethink their plans and develop innovative strategies to facilitate home sales.
How did mortgage rates affect low inventory?
The American construction industry faced various challenges at the beginning of this year. Suffice it to say that labor costs are still high, and building materials cost a fortune. However, based on conservative valuation, the inventory problem will fix itself in the long run.
Let’s see another interesting aspect of the housing supply conundrum! People won’t give up on a 3 percent interest rate (granted during the pandemic and the following year) for a 7 percent rate for financing a new home in 2024. The solution to this problem is for the FED to reduce the interest rates. But this would entail a far-fetched optimism the real estate market might not be ready yet.
What everything boils down to in 2024 – Interest rate forecast
Mortgage rates have been acting like a cat on a hot tin roof. As we edge into 2024, expect these rates to find some equilibrium. Think of it as the shake-out phase where only the most dedicated players stay in the game. Timing will be critical if you dive into homeownership or refinance. Keep a keen eye on financial forecasts and lock in rates when they take a dip.
The annual percentage rate (APR) as of March 2024 is 6.139% (for a 15-year fixed-rate mortgage) and 6.888% (for a thirty-year fixed rate). At the same time, the APR stands at 7.864% (for a 5-year adjustable-rate mortgage).
Why shouldn’t you expect a miracle in interest rates?
Many people will reconsider buying a new home if interest rates hit five percent. Unfortunately, battling ongoing inflation, the FED won’t likely cut interest rates, at least not spectacularly. The most optimistic voices predict a mild decline in interest rates of over 4 percent by the end of 2024. This cut will occur in three or four stages throughout the year. So, keep your eyes peeled for today’s rates on sites like Rocket Mortgage!
Interested in home prices? Read between the lines!
Investors and homebuyers had a tough time dealing with the run-up in home prices. The S&P CoreLogic Case-Shiller Home Price Index highlighted a 5 percent yearly increase in property prices. Undeniably, the surge has been a tough pill to swallow for many. The median home sale price in the United States was $402,000 in January 2024. As we pointed out earlier, this average underlines the 5 percent increase from a year before.
Secondly, active property listings have grown by about 14.8 percent since last year. Thirdly, 11.3 percent more homes were newly listed. Another excellent news on our road to recovery is that more homes were sold in this period by about 2.8 percent.
The South is the leader in new listings.
The increase in active listings was driven mainly by big Southern metros, which had an average increase of 17.0% over the previous year. Active inventory in large Midwestern metros increased 6.5% from a year earlier. Meanwhile, significant Western and Northeastern metros reported inventory losses of 1.0% and 4.2% in February, respectively.
Furthermore, the South has been substantially driving the increase in availability of houses priced between $200,000 and $350,000. Did you know these homes were sold the most nationally? Furthermore, the Southern metros accounted for more than half (55.5%) of the available inventory in February 2024, up from 46.9% in February 2019.
Stay sharp on new opportunities, but don’t expect plummeting property prices!
As we look ahead, the escalation is swapping its sprint for a marathon. Yes, home prices are still on the upward trail. Nevertheless, this pace won’t leave you breathless. This doesn’t mean homes will be dirt cheap, but imagine a scenario where bargains aren’t that rare. It’s all about staying vigilant and ready to seize on opportunities! In the long run, a market correction must take place.
The supply saga continues, though there’s a twist.
It’s no secret that the US housing supply could use a defibrillator. Today, CNN Business reported that the American real estate market is about 6.5 million properties short. While builders are getting down to brass tacks, the supply shortage won’t vanish overnight. But here’s a twist: the types of homes being built are changing.
There’s a discussion about more affordable, smaller homes. Thus, we can meet the demand of (middle- to low-income) first-time homebuyers and downsizers. This pivot could be the silver lining for many who’ve felt sidelined in the market.
Location, location, and… remote work?
The old saying “location, location, location” is getting a new spin in 2024. Remote work is becoming a mainstay for many folks, so the desirability of locations is shifting. No wonder suburbs and rural areas are getting their moment in the sun, offering more bang for your buck. Undoubtedly, this nationwide migration pattern is reshaping the housing market. Thus, it will create hubs of opportunity far from the madding crowd of city centers.
Renting vs. buying will remain the classic debate in 2024.
With all this talk about buying, what about renting? The scales are constantly tipping. Still, renting might not be the back seat it’s often made out to be. The median US rent was $2,012 as of March 2024 instead of $2,100 a year before. The market temperature is warm, indicating an emphatic interest in rental units. So, investors interested in buying residential assets, look out! This can be your point of entry to the rental game!
Why is renting still popular?
Renting offers a stable, flexible alternative for those wary of jumping into homeownership. Can you blame renters? Fluctuating rates and skyrocketing prices can discourage anybody. Furthermore, the required down payment is exorbitant, thus, entirely out of reach for many. However, as more people weigh the option of renting a unit, expect rental prices to reflect the increased demand. It’s a delicate dance between freedom and investment. Under such circumstances, renting has become part of the American Dream and is here to stay.
Final thoughts
To summarize our analysis, the housing market faces the same challenges with minor variations as in previous years. Property prices climb at a slow but steady pace. The FED won’t reduce interest rates as long as inflation still haunts us. The housing crisis won’t be solved suddenly, so the market will likely suffer in 2024 but at a reduced rate. Therefore, you shouldn’t put your home-buying dreams on indefinite hiatus!
As we examine the 2024 US housing market, it becomes clear that specific challenges remain. But opportunities will also emerge! It doesn’t matter whether you’re a buyer, seller, investor, or just a curious onlooker. Staying informed and agile is crucial. Working with housing professionals can benefit you from every perspective.
The 2024 housing market invites us to be hopeful yet prudent, daring yet wise. Here’s to making informed decisions and seizing opportunities! The future’s not set. Instead, it’s crafted by the choices we make today. Let’s make them count!
