Housing Market 2024
If you have thought about purchasing a new home within the last couple of years, you have no doubt discovered what a tight housing market we have been in. There are several issues that are leading to such a tight market including low inventory, moderate interest rates and rising home prices. Let’s take a deeper look as to what is driving the current market and what experts expect to see in 2024.
Low Housing Inventory
Over the last 3 years it seemed that as soon as a decent house hit the market, it was under contract! We saw bidding wars, large cash offers over asking, and people waiving the inspection to make their offer more appealing. Currently there are historically low numbers of houses available. But you may be surprised to find out that this is an issue that has been brewing since the Great Recession (2007-2009).
Once the housing bubble burst in 2008, new home construction dropped significantly and remained lower for the next decade.
So, we have had a decade of underbuilding new homes to meet demand. On top of this, Millennials, who make up the largest generation, are starting households and are in the market to purchase single family homes. The number of young families starting households far outpaces the building of new homes.
There is currently a gap of 6.5 million single family homes that would be needed to meet today’s demand. Unfortunately, this isn’t the only factor leading to the low housing inventory!
Interest Rates
During the Covid pandemic, the Federal Reserve lowered interest rates to historic levels. In January of 2021 mortgage rates fell to a record low of 2.65%. As a result, most homeowners took advantage of the historic low interest rates and refinanced their home. Today 85% of mortgage holders have an interest rate under 5%. With current rates in the upper 6’s and 7’s, people do not want to list their house and leave their low interest rate.
Rising Home Prices
Basic economics dictate that high demand and low supply will result in price increases – and the cost of housing has significantly increased. But supply and demand aren’t the only factors driving up the cost of housing. With the pandemic came supply chain issues and the costs of building materials rose. When it costs more to build a house, the price tag to purchase that house will rise along with it.
According to the National Association of Realtors, in 2019 the median price of a single-family home in the U.S. was $269,100. In November of 2023, the median price of a single-family home in the U.S. was $387,600. That is a 69% increase! The difference in buying power is staggering. If a person purchased a home for $269,100 at 3% in 2020, the mortgage would have been $1,135 (this number does not include PMI, insurance, or taxes). Today, assuming a similar home costs $387,600 and is financed at 7%, the mortgage would be $2579 (again not including PMI, insurance, or taxes). That is a big difference!
What to expect in 2024
Experts predict that the Federal Reserve may make 2 small rate cuts in 2024 as inflation nears its goal of 2%. It will give buyers a little relief, but not much. Fannie Mae predicts that mortgage rates will be around 6.5% by the end of 2024. If interest rates do drop, that will help housing sales increase, but not significantly. It will take years of home building at increased rates to meet the market’s demand, so housing inventory will likely remain tight. Expect housing prices to remain more stable without sharp spikes, but unlikely to drop.
Consider an Agape Remodel
If you are one of the 85% of mortgage holders in an existing home with a low interest rate, consider staying in your home. If you are unhappy with your home, Agape can make significant changes to your home with a beautiful remodel. Is space an issue? Consider removing walls to make the space feel larger, or you can add more space with an addition. Does your home feel dark and dated? Agape’s talented architects will create a design that best uses your home’s space to fit your family and lifestyle. Love where you live with an Agape home remodel!
