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The American housing market has been a rollercoaster of activity in recent years, and as we move through 2024, the ride appears to be levelling out. With a mix of predictions and economic indicators at play, understanding the trajectory of home prices and affordability is crucial for stakeholders in the real estate sector.

Home Price Trends

According to CoreLogic, home prices have seen a year-over-year increase, with a slight month-over-month dip as of December 2023. This trend suggests that while the market is not experiencing the rapid growth of previous years, it is still on an upward trajectory. Comerica Bank’s forecast aligns with this view, predicting a 2.9% rise in national house prices for 2024.

Affordability Concerns

Despite the optimistic predictions for home prices, affordability remains a pressing issue. The combination of high mortgage rates and home prices, along with historically low housing stock, continues to make homeownership a challenging goal, especially for first-time buyers. The market’s recovery hinges on improved affordability, which will require a significant increase in home inventories and a continued decline in mortgage rates.

Mortgage Rate Movements

Mortgage rates have shown a downward trend, providing a beacon of hope for potential homebuyers. The rates, which have been below 7% so far in 2024, are expected to drop further, potentially improving affordability and stimulating market activity. However, the full impact of these rate changes on home prices and affordability remains to be seen.

The Inventory Equation

The supply of homes for sale is a critical factor in the affordability equation. A substantial increase in inventory is necessary to alleviate the upward pressure on home prices. Experts suggest that for a true recovery, we need to see a considerable rise in the number of homes on the market, which would help level off prices or even cause them to retreat from their peak levels.

Economic and Demographic Tailwinds

Despite the challenges, there are positive signs on the horizon. The entry of Millennials into their prime home-buying years, combined with wage growth and financial wealth, are expected to support housing demand in 2024. These factors, along with a healthy job market, could provide the necessary momentum for the housing market to overcome its current obstacles.

Conclusion

The 2024 real estate market is poised at a crossroads, with home prices expected to continue their ascent, albeit at a slower pace. Affordability remains a central concern, with the market’s recovery dependent on increased inventory and lower mortgage rates. Stakeholders will need to pay close attention to these factors as they navigate the year ahead.

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