This has been a long year and I wanted to review the economic backdrop of the housing market in 2024. This analysis from ALFReD shows a remarkably resilient housing market in terms of the pace of home sales and the sales prices in the face of crushing affordability challenges and a persistent lack of supply. I hope you find it useful. Know Better. Work Smarter. Be More Successful. Tim
The U.S. residential real estate market in 2024 was characterized by a complex interplay of economic factors, with mortgage rates, housing inventory, and affordability concerns playing pivotal roles in shaping market dynamics. Key economic indicators throughout the year revealed a mixed landscape, with some metrics showing improvement while others highlighted ongoing challenges. This comprehensive analysis breaks down the most significant economic factors affecting the residential real estate market in 2024, examining their monthly progression and overall impact.
Mortgage Rates: The Dominant Force
Mortgage rates remained one of the most influential factors in the 2024 housing market, continuing to shape buyer behavior and market dynamics throughout the year.
Monthly Breakdown of 30-Year Fixed Mortgage Rates
- January 2024: 6.62%
- February 2024: 6.65%
- March 2024: 6.54%
- April 2024: 6.34%
- May 2024: 6.39%
- June 2024: 6.71%
- July 2024: 6.96%
- August 2024: 7.07%
- September 2024: 7.31%
- October 2024: 7.18% (projected)
- November 2024: 7.05% (projected)
The year started with relatively high rates, a continuation of the trend from 2023. Rates showed some volatility throughout the year, with the Federal Reserve’s decisions and inflation data playing crucial roles in these fluctuations.[1]
Impact on the Market
The high mortgage rates had a significant cooling effect on the housing market, particularly in the first half of the year. This led to what economists termed a “lock-in effect,” where homeowners with low mortgage rates were reluctant to sell and take on higher-rate mortgages for new purchases. This phenomenon contributed to reduced inventory and slower sales in many markets.
Housing Inventory: A Persistent Challenge
The supply of homes for sale remained a critical factor in 2024, influencing both prices and sales volume.
Months’ Supply of Homes
- January 2024: 2.9 months
- March 2024: 2.9 months
- May 2024: 3.2 months
- July 2024: 3.3 months
- September 2024: 3.5 months
- October 2024: 3.6 months (projected)
- November 2024: 3.7 months (projected)
While there was a slight improvement in inventory levels as the year progressed, the market remained firmly in seller’s market territory (defined as less than 6 months of supply). This continued to put upward pressure on home prices in many areas.[2]
Home Sales: A Tale of Two Markets
The existing home sales market and the new construction market told different stories in 2024.
Existing Home Sales (Seasonally Adjusted Annual Rate)
- January 2024: 4,000,000
- March 2024: 3,820,000
- May 2024: 3,710,000
- July 2024: 3,580,000
- September 2024: 3,470,000
- October 2024: 3,420,000 (projected)
- November 2024: 3,390,000 (projected)
A consistent decline in existing home sales was observed throughout the year, reflecting the challenges of high mortgage rates and low inventory.[3]
New Home Sales (Seasonally Adjusted Annual Rate)
- February 2024: 668,000
- March 2024: 693,000
- April 2024: 679,000
- September 2024: 715,000 (projected)
- October 2024: 723,000 (projected)
- November 2024: 730,000 (projected)
In contrast to existing home sales, new home sales showed more resilience. This divergence was largely attributed to builders’ ability to offer incentives and more inventory in desirable locations.[4]
Home Prices: Defying Expectations
Despite challenges in sales volume, home prices remained surprisingly resilient in 2024.
S&P/Case-Shiller 10-City Composite Home Price Index (appreciation rates per month)
- January 2024: +0.2%
- February 2024: +0.4%
- March 2024: +0.7%
- April 2024: +1.3%
- May 2024: +1.2%
- June 2024: +0.9%
- July 2024: +0.6%
- August 2024: +0.3%
- September 2024: -0.1%
The S&P/Case-Shiller index showed continued growth in home prices throughout 2024, defying expectations of a significant correction. This price resilience was largely due to the persistent low inventory and the “lock-in effect” mentioned earlier.[5]
Housing Starts: A Bright Spot in Construction
Housing starts, particularly for single-family homes, showed strength in 2024, reflecting builders’ confidence in future demand.
Single-Family Housing Starts (Seasonally Adjusted Annual Rate)
- January 2024: 1,004,000
- March 2024: 1,062,000
- May 2024: 1,060,000
- July 2024: 1,062,000
- September 2024: 963,000
- October 2024: 975,000 (projected)
- November 2024: 980,000 (projected)
Single-family housing starts remained robust throughout much of 2024, indicating builders’ optimism about future market conditions.[6]
Pending Home Sales: A Leading Indicator
The Pending Home Sales Index (PHSI) provided insights into future closed sales throughout 2024.
Pending Home Sales Index
- January 2024: 74.4
- March 2024: 78.2
- May 2024: 70.8
- July 2024: 70.2
- September 2024: 75.8
- October 2024: 76.2 (projected)
- November 2024: 76.5 (projected)
Fluctuations in pending home sales throughout the year reflected the ongoing challenges in the market, including affordability concerns and inventory constraints.[7]
Economic Backdrop: GDP and Unemployment
The broader economic context played a crucial role in shaping the housing market in 2024.
GDP Growth (Annualized)
- Q4 2023: 3.3%
- Q1 2024: 1.6%
- Q2 2024: 3.0%
- Q3 2024: 2.8%
- Q4 2024: 2.5% (projected)
Unemployment Rate
- January 2024: 3.7%
- March 2024: 3.8%
- June 2024: 3.6%
- September 2024: 3.8%
- October 2024: 3.7% (projected)
- November 2024: 3.7% (projected)
The U.S. economy showed resilience in 2024, with GDP growth remaining positive and unemployment rates staying low. This economic stability helped support housing demand, even in the face of affordability challenges.[8]
Inflation: A Key Driver of Monetary Policy
Inflation trends were closely watched throughout 2024, as they heavily influenced Federal Reserve policy and, by extension, mortgage rates.
Consumer Price Index (CPI) Year-over-Year Change
- January 2024: 3.1%
- March 2024: 3.5%
- June 2024: 3.0%
- September 2024: 3.7%
- October 2024: 3.5% (projected)
- November 2024: 3.4% (projected)
Inflation remained above the Federal Reserve’s 2% target throughout 2024, leading to continued tight monetary policy and contributing to the elevated mortgage rates.[9]
Foreclosure Activity: A Concerning Trend
There was an increase in foreclosure activity in 2024, particularly towards the latter part of the year.
Foreclosure Filings (Default Notices, Scheduled Auctions, Bank Repossessions)
- October 2024: 30,784 properties
- November 2024: 31,200 properties (projected)
Foreclosure filings in October 2024 were up 4% from September and represented one in every 4,578 housing units nationwide. While this increase was notable, foreclosure activity remained below historical norms, reflecting the overall stability of the housing market.[10]
Home Equity: A Silver Lining
Despite challenges in other areas, homeowners’ equity continued to grow in 2024.
Equity-Rich Properties
- Q2 2024: 49.2% of mortgaged homes were equity-rich
- Q3 2024: 50.1% (projected)
- Q4 2024: 50.5% (projected)
Nearly half of all mortgaged homes were considered “equity-rich” (loan balance less than 50% of estimated market value) by the second quarter of 2024. This represented a 3.4 percentage point increase from the first quarter, indicating continued home price appreciation and financial stability for many homeowners.[11]
Regional Variations: A Tale of Many Markets
The housing market in 2024 was characterized by significant regional disparities, with some areas experiencing strong growth while others faced challenges.
Home Price Growth by Region (August 2024)
Price growth slowed across two-thirds of the nation’s largest markets in August 2024. The strongest cooling was seen in the Midwest and Northeast, although these regions continued to see the strongest home price growth nationwide. Conversely, about 25% of major markets saw prices edge lower, with notable declines in Florida cities like North Port and Cape Coral.[12]
Affordability: A Persistent Challenge
Housing affordability remained a significant concern throughout 2024, with rising home prices and high mortgage rates creating barriers for many potential buyers.
Affordable Listings
Only 15.5% of homes for sale in 2023 were affordable for the typical U.S. household, the lowest share on record. While specific data for 2024 was not provided, the trend of limited affordable inventory likely continued into 2024, given the persistent challenges in the market.[13]
The Bigger Picture: What It All Means
The 2024 U.S. residential real estate market was characterized by a complex set of economic factors that created both challenges and opportunities. High mortgage rates and low inventory were the dominant themes, leading to a market that favored sellers in terms of prices but saw reduced transaction volume.
Key Takeaways:
- Mortgage Rate Impact: The elevated mortgage rates throughout 2024 continued to be a significant headwind for the housing market, dampening affordability and reducing transaction volume.
- Inventory Constraints: The persistent low inventory of homes for sale, exacerbated by the “lock-in effect,” kept upward pressure on prices despite the challenging interest rate environment.
- New Construction Resilience: The new home market showed greater resilience than existing home sales, benefiting from builders’ ability to offer incentives and meet demand in desirable locations.
- Price Stability: Despite expectations of a correction, home prices remained surprisingly stable and even increased in many markets, supported by low inventory and continued demand.
- Economic Backdrop: The overall economic environment, characterized by low unemployment and moderate GDP growth, provided a supportive foundation for housing demand.
- Regional Variations: Significant regional disparities emerged, with some markets experiencing strong growth while others faced challenges, highlighting the importance of local market conditions.
- Equity Growth: Despite market challenges, homeowners continued to build equity, providing a financial cushion and potential source of future market activity.
- Foreclosure Activity: While foreclosure filings increased, they remained below historical norms, indicating overall market stability.
Looking Ahead: The Road to Recovery
As 2024 drew to a close, the housing market showed signs of adapting to the new normal of higher interest rates. The slight improvements in inventory and the resilience of new home construction suggested potential for a more balanced market in the future. However, affordability remained a significant concern, particularly for first-time homebuyers.
The path forward for the U.S. residential real estate market will likely depend on several factors, including the trajectory of inflation, Federal Reserve policy, and overall economic growth. A meaningful recovery in transaction volume may require a combination of increased housing supply, moderation in home prices, and potentially lower mortgage rates.
As we move beyond 2024, stakeholders in the housing market – from policymakers to real estate professionals – will need to navigate these complex economic factors to address the ongoing challenges of affordability and accessibility in the U.S. housing market. The resilience demonstrated by the market in 2024, despite significant headwinds, suggests that with the right conditions and policies in place, a more balanced and accessible housing market could emerge in the years to come.
[Footnotes] [1] Mortgage News Daily [2] National Association of Realtors [3] Mortgage News Daily [4] Mortgage News Daily [5] Federal Reserve Economic Data (FRED) [6] U.S. Census Bureau [7] National Association of Realtors [8] U.S. Bureau of Labor Statistics [9] U.S. Bureau of Labor Statistics [10] ATTOM Data Solutions [11] ATTOM Data Solutions [12] ICE Mortgage Technology Mortgage Monitor [13] Redfin