By Sarupya Ganguly
Are you ready to take advantage of the upcoming changes in the U.S. housing market? According to leading analysts, home prices are expected to rise modestly in the next few years, despite anticipated Federal Reserve interest rate cuts and a tight supply.
Even with the current aggressive expectations for interest rate cuts, forecasts for U.S. house prices have remained relatively stable. This indicates that the market is poised for a more subdued upswing compared to recent years.
Despite a 7% decrease in average property prices since the central bank raised rates, prices are still more than 50% higher than pre-pandemic levels. Homeowners who locked in low mortgage rates are reluctant to sell, contributing to the price appreciation.
With expectations of the Fed cutting rates by a total of 75 bps by year-end, the housing market will continue to be constrained by limited supply. The S&P CoreLogic Case-Shiller composite index of 20 metropolitan areas predicts a median rise of 5.4% in 2024.
While the market is expected to stabilize, affordability remains a concern as prices continue to rise. The 30-year mortgage rate is forecasted to average 6.7% in 2024, potentially impacting affordability for first-time homebuyers.
Although lower interest rates will boost housing demand, an acute shortage of previously-owned homes will continue to strain affordability. Relief from lower interest rates may help alleviate rental inflation in the coming months.
Analysis:
The U.S. housing market is expected to see modest price increases in the next few years, despite anticipated Federal Reserve interest rate cuts. Homeowners who have locked in low mortgage rates are reluctant to sell, leading to price appreciation. Affordability remains a concern, especially for first-time homebuyers, as mortgage rates are forecasted to increase. However, lower interest rates may help ease rental inflation in the coming months. Overall, the housing market is poised for stability, but affordability and supply constraints continue to be key factors to watch.