Current State of the U.S. Housing Market

Current State of the U.S. Housing Market
Photo by Tierra Mallorca / Unsplash

It appears that there is a mixed outlook, not surprisingly, on the state of the U.S. housing market. We've all seen the sky high listing prices in the past few years and many wonder what will come next. Will demand slow or increase? What will mortgage rates do? The latest reports don't seem to clarify the path for us and leave the housing market at a crossroads.

According to HousingWire, it is expected that home sales will rebound 14.7% to 5.24 million in 2024 due to economic growth and stable mortgage rates. They "...expect home sales to rebound 14.7 percent to 5.24 million as economic growth resumes and mortgage rates stabilize following an expected compression of the currently abnormally high..."

However, HousingWire also predicts that if mortgage rates remain above 5.875%, there could be a national home price decline of 5.9%-7.4% in 2023. This decline in affordability could potentially be more significant if mortgage rates rise higher than this level.

Whistling the same tune, Fox Business also warns of potential difficulties in the housing market, with high mortgage rates causing potential pain for home buyers. Writing that "New data from the Mortgage Bankers Association shows that mortgage application volume hit its lowest level in more than 20 years in the last week of December."

In November 2022, Norada Real Estate reports that the median listing price for homes trended upwards by 11.0% to $416,000 compared to the previous year However, this increase in price may be slowing down, and "The housing market is predicted to slow down further in 2023." Norada also mentions, "If mortgage rates continue to rise, the housing demand will decrease further in 2023." And, "Looking at these latest trends, the housing market appears to be fully in the “correction” area since mortgage rates have surpassed the 7% threshold..."

Diving further into the mortgage interest rate question, CNBC says, "The interest rate for a 30-year fixed-rate mortgage in the U.S. is expected to drop to 5.25% by the end of this year, according to a forecast by the financial services website Bankrate..."

But, some suggest that the Federal Reserve may raise interest rates in 2023. According to InvestorPlace, the Federal Reserve projects that the Federal Funds Rate (FFR) will average around 5.1% in 2023. And US News states that the Federal Reserve is not entertaining the idea of cutting rates in 2023, according to the Fed's minutes from their mid-December meeting.

It is difficult to predict how these factors will evolve over the course of the year. And it is always a good idea to keep an eye on economic developments and to consult with a financial professional for personalized advice on managing your finances.

Overall, it seems that the housing market may face challenges in the coming year due to potential rising mortgage rates and the potential impact on affordability. However, there are also predictions of a rebound in home sales and an increase in median listing prices in the future. The disparate opinions mean it is even more important for potential home buyers to carefully consider the current market conditions and their own financial situation before making any decisions on residential real estate purchases.