Navigating the 2024-2028 Housing Market: A Gradual Thaw and Emerging Challenges
As we step into the years 2024 to 2028, the housing market is poised for a gradual thaw, bringing with it both opportunities and challenges. The predictions are based on insightful data from various authoritative sources, including the U.S. News Housing Market Index, providing a comprehensive overview of the national housing market.
Sales to Gradually Rebound as Mortgage Rates Decline
After hitting a 28-year low in 2023, existing home sales are expected to rebound slowly as mortgage rates decline. The Federal Reserve's recent economic projections suggest that inflation may not consistently subside to 2.0% until 2026, potentially leading to declining but higher short-term interest rates over the next two years. Lower mortgage rates, essential for encouraging home sales, may take time to reach levels that prompt sellers to make a move.
True Price Discovery Delayed But Anticipated
The concept of price discovery, where buyers and sellers agree on a price based on market conditions and financing availability, has been delayed in the housing market due to a lack of supply and affordable financing. The "lock-in effect" of homeowners with historically low mortgage rates has sustained home values, even with higher mortgage rates. However, a significant shift is expected when traditional fixed-rate, 30-year mortgages fall below 6%, leading to increased inventory and improved price discovery.
Population Changes and Regional Shifts
With the COVID-19 pandemic receding, population changes are returning to pre-pandemic trends. The U.S. Census Bureau's Vintage 2023 population estimates indicate a gain of over 1.6 million people in 2023, with the South dominating growth. Regional changes include fewer deaths, with Texas and Florida leading the way in population increases. These demographic shifts could have implications for housing demand and regional housing markets.
Geopolitical Concerns and Their Impact
The global stage presents challenges that could affect the housing market. Geopolitical concerns highlighted at the recent World Economic Forum include the rise of artificial intelligence, the potential impacts of climate change, crucial elections worldwide, and an increasingly unstable world with hotspots in various regions. The economic threat posed by these concerns, coupled with the 24/7 news cycle, might influence consumer sentiment, affecting decisions to make significant investments like buying a home.
Hybrid Work Schedules and Their Influence
The shift to hybrid work schedules, with employees working remotely two to three days per week, appears to be a lasting trend. Despite efforts to return to pre-pandemic office norms, data from Kastle System's "Employee Back to Work Barometer" indicates that office occupancy remains at around half of pre-pandemic levels. This shift in work dynamics may influence housing preferences, with implications for urban and suburban real estate markets.
In conclusion, the 2024-2028 housing market is expected to see a gradual thaw, driven by declining mortgage rates and various demographic and economic factors. However, challenges stemming from geopolitical uncertainties and shifting work dynamics underscore the need for adaptability in navigating this evolving landscape. As buyers and sellers engage with the market, staying informed about these trends will be crucial for making informed decisions in this dynamic real estate environment.