In 2024, the U.S. residential housing market experienced a period of transition, characterized by a mix of stabilizing factors and ongoing challenges. The year began with lingering effects from high interest rates set in the previous years, which had significantly impacted affordability and slowed down both buying and selling activities.

Lock the Doors

The housing market saw mortgage rates start to decline from their peak, dropping to around 6.5% by mid-year from highs of nearly 8% in late 2023, offering some relief to prospective homebuyers. This slight decrease in rates did stimulate some demand, but the pace of home sales remained below historical norms due to the “lock-in effect,” where many homeowners were reluctant to sell and give up their lower-rate mortgages for new, higher-rate ones.

Prices Steady

Home prices, despite the slowdown in sales, continued to rise, though at a moderated pace. According to various indices, the national median home price was expected to increase by about 2-4% throughout the year, reflecting a cooling but still robust demand against a backdrop of limited inventory. Markets like Pittsburgh, Fort Lauderdale, and Austin were among those witnessing significant price growth, driven by local economic conditions, migration patterns, and relative affordability. Conversely, some high-cost areas like San Francisco and New York City saw more modest growth or even slight declines in home values, attributed to shifts in work patterns, such as remote work becoming more permanent, reducing the need for city-center living.

Inventory Up

Inventory levels showed signs of improvement, with new home construction picking up as builders capitalized on the demand for new housing. The number of homes for sale increased by around 23% from the previous year’s levels by September, providing buyers with more options, although the supply was still below what would be considered balanced for a healthy market. This increase in inventory helped to temper price growth in some regions but was not uniform across the country, with supply constraints remaining in many desirable locales.

Reliable Rentals

The rental market also saw changes, with rental prices stabilizing after several years of steep increases. In areas with new multifamily housing construction, rent growth was more subdued, but in others, particularly in the Sun Belt where population growth outpaced housing development, rents continued to climb. This led to a noticeable trend where more young families and individuals opted for renting larger apartments or single-family homes due to persistent buying unaffordability.

The Grind is On

Economic forecasts suggested that without significant economic downturns or sudden policy shifts, the housing market would continue its gradual adjustment. Mortgage rates were anticipated to remain above 6% unless a recession prompted further Federal Reserve action, which could then lead to a more substantial decrease in rates, potentially stimulating more market activity.

Trying to Find its Footing

Overall, the 2024 housing market in the U.S. was one of cautious optimism, where buyers had slightly more negotiating power than in previous years, but affordability remained a key issue. Sellers, on the other hand, had to adjust expectations regarding sale prices and timelines due to the cooling market dynamics. The year painted a picture of a market slowly finding its new normal after several years of exceptional conditions driven by low interest rates and high demand.

 

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