Will the Housing Market Crash in 2024?
Interest rates remain high and the market is still competitive. Does this portend a market crash soon?
It seems experts and real estate agents have been anticipating a housing market crash since the pandemic as home prices skyrocketed and interest rates on mortgages doubled, but it hasn’t happened yet. Is 2024 the year?
“The housing market is entering 2024 at an interesting point,” says Danielle Hale, Realtor.com’s chief economist. “While many experts anticipated significant price declines in 2023, the housing market largely defied those expectations with home sales prices dipping on a year-over-year basis for just four months, and typical home asking prices falling for just two. The factors that led analysts to expect home price declines remain largely unchanged or worse.”
What’s on the horizon for the coming year? Experts have mixed views, but most agree a crash isn’t likely. Instead, they’re anticipating what they’re calling “a full reset,” a “downturn,” or a “correction.”
With each passing season, we have yet to see the drop so many feared was coming. Indeed, several agents warned last year of a correction in the market that would signal a shift back to normal prices and more inventory plus less competitive bidding. Still, in many parts of the country, the market seems as competitive as ever, especially for first-time buyers.
“Real estate is a major driver in our economy and the Fed must see the logjam that now exists. It’s a question of when (mortgage) rates will start to drop meaningfully, not if they will,” says Melissa Cohn, the regional vice president of William Raveis Mortgage. “My guess is that Christmas won’t come for the real estate sector until the beginning of 2024.”
Looking Back
When the pandemic hit and many employees began working from home, renters decided they wanted more space, and homeowners decided they were due for an upgrade. Everyone wanted a home office and a yard to relax in; a boom began with the market.
Soon, home prices were rising to astronomical levels.
To correct the boom and account for inflation, the Feds began raising mortgage interest rates. Doing so discouraged many buyers from either entering the market or selling their current home to upgrade. Now, supply is decreasing for that reason.
“Supply is down because many would-be sellers are staying on the sidelines. If they move, they would have to replace their existing cheap mortgage with a much more expensive one, possibly going from 3.5% to closer to 8%,” says Robert Elson of Coldwell Banker Warburg.
With tight inventory, home prices continued increasing, although many believe they are leveling out now.
“Although home prices are down slightly from 2022 peaks, the decline is modest, whether we’re measuring sale prices or listing prices,” Hale says. “The number of homes for sale is above record lows hit in early 2022, but remains 45% below what was typical from 2017 to 2019.”
Low inventory, in turn, spurred an increase in new construction, which Hale says is predicted to continue.
“Despite affordability headwinds, home builders have so far capitalized on the dearth of existing homes for sale by maintaining a relatively robust pace of construction,” she says, pointing to an October report on the trend. “As long as mortgage rates remain elevated, we are likely to see this trend continue,” Hale said.
In that report, Hale points out that while increasing mortgage rates prevent some buyers from entering the market, they can also have the opposite effect of spurring them into signing a contract in anticipation of even higher rates coming down the pike.
So, Will the Market Crash?
Experts don’t anticipate a housing market crash in the next year. As Steve deGuzman, founder and CEO of rēhavaPress points out, the 2008 crash was the result of homeowners not being able to pay their mortgages. While factors are at play making mortgages higher for buyers, banks have changed their lending practices in the years since.
See more at…https://www.bhg.com/will-the-housing-market-crash-in-2024-8383588?