2024 Housing Market Update
Home Prices Are Expected to Rise
National home prices defied predictions and increased by 5.5 percent year-to-year in December 2023.
Last year at this time many economists were forecasting that home prices would decline slightly by the end of 2023. The general expectation now is for them to continue to rise throughout 2024. CoreLogic, a data and analytics company, expects home prices to increase by 2.8 percent.
Interest Rates Are Down Slightly
Interest rates are currently hovering in the 7 percent range. While this is a far cry from the days of 3 percent mortgages, it's a welcome relief to buyers who watched rates climb to 8 percent in October 2023.
Where Are Rates Headed?
Many lenders believe that mortgage rates will decrease by late 2024, or sooner if economic indicators show that inflation is easing sufficiently. They could also go up, at least temporarily, if Consumer Price Index reports are not favorable.
Note: Rate drop predictions tend to be in the 1 percent range, not a return to the historically low rates we saw a few years ago.
The Supply of Homes May Ease (Slightly)
In December of 2023 the national unsold supply of homes was 3.2 months. (This is the amount of time it would take to sell all existing inventory at the current rate of sale if no new listings were added.)
By comparison, it was 2.6 months in December of 2022, and closer to 13 months going into the recession in 2008. Six months of supply is generally considered a balanced market.
Why Housing Inventory Isn't Higher
New Construction Is Struggling to Meet Demand
Builders scaled back on new construction starts in recent years due to the rising cost of materials and a shortage of skilled labor. While more new homes are now coming on the market, they're being met with high demand from home buyers.
Current Homeowners Are Staying Put
Many homeowners are locked into historically low interest rates and are unwilling to lose them by selling their home.
Which States Had the Best Price Appreciation?
Rhode Island took the crown from Florida in 2023, with a year-to-year home price appreciation rate of 13.3 percent in December, according to CoreLogic. New Jersey was next at 11.3 percent, followed by Connecticut at 10.5 percent.
The top cities with annual gains in December were Miami - for the second year in a row (10.7 percent), San Diego (8.1 percent), and Chicago (6.8 percent), according to CoreLogic.
The Eastern U.S. Is Leading the Price Trend
After years of seeing big home price increases in the western U.S., the states with the highest year-to-year appreciation in December 2023 were all in the eastern half of the country.
New York was the only eastern state in the "under 1 percent appreciation" category. Texas, Montana, and Idaho were also in that category, and no states showed an annual price decline in December.
Elections Can Affect Fall Housing Activity
During presidential election years the housing market is sometimes affected by how voters feel about the economic outlook of the person most likely to win, especially as we draw closer to voting day.
A Reminder About the Housing Headlines
News articles make real estate statistics sound as though they're a reflection of the current market, but most home sale data are based on closings that occurred at least a month or two previously.
The buyer decisions that determined the sale prices were made even earlier, typically around 30 days before the closings. This means that housing news based on closed sales often reflects the market that is two to four months old.
"Home Sales Are Down" Does Not Always Mean a Weaker Market
The phrase "Home sales are down" is often stated in a way that implies a softening housing market, but home sales are a measure of volume, not prices.
In a very low-inventory market home sales can be decreasing while prices are climbing, whereas a shift to higher inventory can mean that home sales go up while prices decrease because there's less competition.
No One Knows for Sure What Will Happen
Every year a look back at "expert predictions" reminds us that even the people who are paid to understand the real estate market are wrong on a regular basis. :)
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