Housing Market Outlook: Mid-2024 Predictions and Analysis

As we approach the midpoint of 2024, it's an opportune time to review and reassess the housing market predictions made at the end of last year. In this article, we'll examine the current state of the market, evaluate the accuracy of earlier forecasts, and provide updated predictions for the remainder of the year. Price Forecast ReviewIn October 2023, the prediction was for relatively flat year-over-year home prices by December 2024, with a range of -4% to +4%. This wide range acknowledged the year's unusual market conditions, anticipating price moderation rather than significant swings in either direction. Current Market StatusAs of May 2024, prices are up about 5% year-over-year, slightly exceeding the high end of the predicted range. However, with seven months remaining in the year, there's still time for prices to adjust. Transaction VolumeThe forecast for home sales volume was for relatively flat growth, with a slight uptick by December. Current data shows that home sales have remained remarkably steady, down just slightly year-over-year in seasonally adjusted terms, according to Redfin. Key Market DriversThe primary factor influencing the 2024 housing market is affordability. This encompasses three main components: Housing prices Income levels, and Mortgage rates.

Currently, prices remain high and are still increasing, while mortgage rates are significantly higher than in recent years. Although wages are growing slightly above the inflation rate, housing affordability is at its lowest point since the 1980s. Market DynamicsLow affordability is creating unique market conditions: Reduced demand due to affordability issues

The "lock-in effect" causes sellers to stay put in weak supply despite relatively weak demand, leading to continued price increases

Looking Ahead: Second Half of 2024The key question for the remainder of 2024 is how affordability will change. While home prices are unlikely to improve affordability, there are potential shifts in other areas: Wage growth: Real wages are growing at about 1% annually, which may have a minor positive impact on affordability.

Mortgage rates: The most significant potential for change lies in mortgage rates. While volatility is expected to continue, there's a possibility of rates decreasing to the mid-6% range by year-end, depending on Federal Reserve actions and economic indicators.

Supply and demand: New listings are starting to increase year-over-year on a seasonally adjusted basis, potentially easing supply constraints.

Updated PredictionsBased on current trends and potential changes in affordability factors, the updated forecast for the end of 2024 maintains the original range of -4% to +4% year-over-year price growth. However, the outlook is trending more positively, with expectations now leaning towards 0% to 4% growth rather than potential price declines.ConclusionWhile the housing market remains challenging to predict with certainty, current data and trends suggest a potential cooling of price appreciation in the second half of 2024. However, significant price declines appear less likely. As always, local market conditions may vary, and unforeseen economic shifts could alter these projections.

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