The U.S. housing market has experienced various trends and projections in 2023 and looking ahead to 2024. Here are the key insights:
- Federal Reserve Rate Cuts and Home Price Projections: Fitch Ratings anticipates that home prices may increase after the Federal Reserve cuts rates next year. They project a rise in home prices by 0%-3% in 2023 and a further 2%-4% increase in 2025. This increase in home prices is expected despite 88% of the metro areas in the U.S. housing market being overvalued as of the second quarter of 2023. The Federal Reserve is expected to cut interest rates by 75 basis points in 2024, which may impact affordability, particularly for entry-level and first-time homebuyers, thereby constraining demand.
- Housing Market Resilience in 2023: Despite challenges in 2022-2023, including high mortgage rates, the housing market remained intact. The inventory levels, while low, didn’t reach the critically low levels of 2022. New listings data remained stable in 2023, suggesting the formation of a bottom. Even with mortgage rates reaching 8% in 2023, the market saw fewer price cuts than in 2022. This stability is a positive sign for the housing market, indicating its resilience despite economic pressures.
- Home Price Trends and Forecasts: According to CoreLogic, home prices nationwide, including distressed sales, increased by 4.7% year-over-year in October 2023. The forecast for the next year suggests a moderate increase in home prices, with an expected year-over-year growth of 2.9% from October 2023 to October 2024. The Northeast region showed significant price growth, with states like Connecticut, New Jersey, and Rhode Island experiencing the highest annual appreciation. However, some states like Idaho, Montana, Texas, and Utah saw home price declines.
- Market Risk Indicator: CoreLogic’s Market Risk Indicator highlights regions at high risk of price declines. Areas like Cape Coral-Fort Myers in Florida have a 70% probability of a decline in home prices over the next 12 months. Other regions, including Youngstown-Warren-Boardman (OH-PA), Atlanta-Sandy Springs-Roswell (GA), West Palm Beach-Boca Raton-Delray Beach (FL), and Deltona-Daytona-Beach-Ormond Beach (FL) are also at high risk for price declines.