The housing sector is coming out of the doldrums. But will it keep improving through 2024?
The housing sector is coming out of the doldrums. But will it keep improving through 2024?
We’re getting a lot of housing market data this week. Yesterday, we learned that housing construction surged in November. Today, we learned that the number of existing homes sold in November rose, too.
But the big question about the housing market is whether those strong numbers will hold up through the coming year. So we decided to step into the Marketplace time machine and report back from this time next year to see how the housing market is shaping up.
Alright, so: It’s December 2024. Taylor Swift is still the most popular musical artist in the country. People are still hyperventilating about AI. And the housing construction pipeline is doing OK.
“Single family construction is certainly improving,” said Charlie Dougherty, an economist at Wells Fargo.
Now, that probably sounds a little underwhelming. That’s because homebuilders are still dealing with many of the same issues they were facing in 2023.
“You know, the supply side for homebuilders is still constrained, right? Lots are still challenging to find, labor still expensive, building materials still hard to come by,” said Dougherty.
As a result home prices in 2024 have been growing at a modest pace said Odeta Kushi, deputy chief economist at First American.
“So not too hot, like they were over the pandemic, with double-digit house price growth, but still positive, due to the ongoing supply and demand imbalance in the housing market,” said Kushi.
One reason supply and demand are still out of whack is because demand has increased. That’s because in 2024 mortgages have gotten less expensive.
“They started the year much closer to 7%. Now we’re close to 6%,” said Mike Fratantoni, chief economist with the Mortgage Bankers Association.
He says the Federal Reserve has indeed cut rates a few times. That’s after the economy went through a short recession he says, and inflation kept coming down.
But from the perspective of 2023, Fratantoni says that economic outlook isn’t all that scary.
“We expect consumer spending gaining strength over the course of 2024, and certainly expect the pace of home sales to be picking up as we get through the year,” said Fratantoni.
Fratantoni says housing was the first sector to suffer a downturn when the Fed started raising rates. That means it’ll be the first to recover when the Fed starts cutting them.
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