• The Steady Housing Market: Navigating Affordability Challenges in 2024

  • Nov 14 2024
  • Length: 3 mins
  • Podcast

The Steady Housing Market: Navigating Affordability Challenges in 2024

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  • Summary

  • The US housing industry is currently navigating a complex and somewhat stagnant landscape, influenced by various economic and market factors.

    As of September 2024, national home prices, including distressed sales, have increased by 3.4% year-over-year compared to September 2023, although the month-over-month increase was a mere 0.02% from August to September[1].

    Despite this modest growth, the housing market is showing signs of cooling. The CoreLogic HPI Forecast predicts a slight drop in home prices by 0.1% from September to October 2024, and a 2.3% year-over-year increase from September 2024 to September 2025[1].

    Several factors are contributing to this slowdown. High mortgage rates, which were around 6.88% for a 30-year mortgage as of late October, continue to deter potential buyers. Although rates have come down from their peak, they remain high enough to impact affordability[3].

    Inventory levels, while slightly improving, remain low. The nation had a 4.3-month supply of housing inventory as of September, which is still considered a seller's market. This tight inventory, combined with high home prices, is keeping many buyers on the sidelines[3].

    Consumer behavior is also shifting in response to these conditions. Existing-home sales in September were down by 3.5% from the previous year, as homeowners choose to stay in their current homes in anticipation of lower mortgage rates[3].

    The labor market's performance is another significant factor. The economy added only 12,000 jobs in October 2024, the fewest in almost four years, which may be dampening demand and price appreciation in the housing market[1].

    In terms of new construction, housing starts have declined, with single-family housing starts falling 14.1% from the previous month and 14.8% below last July’s levels. Builder sentiment, as measured by the National Association of Home Builders’ Housing Market Index, has also dipped due to affordability constraints from high interest rates[4].

    Despite these challenges, there are some positive indicators. Consumer spending remains solid, and the average effective rent for apartments has increased by 1% over the past year, although this is a significant slowdown from the previous years' growth rates[2].

    Industry leaders are responding to these challenges by emphasizing the need for lower mortgage rates to stimulate the market. According to Selma Hepp, Chief Economist at CoreLogic, "Lower mortgage rates would help spur home sales activity" and add much-needed inventory to the market[3].

    In summary, the US housing industry is experiencing a period of relative stability but with underlying challenges. High mortgage rates, low inventory, and economic uncertainties are keeping the market subdued. However, there are indications that if mortgage rates continue to trend downward, it could loosen the current lock-in effect and potentially boost home sales and inventory levels.
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