The solution will depend on who you ask, says Lawrence Yun, economist at the Nationwide Association of Realtors.
“Some people would say it’s terrible,” he told real estate writers at a recent conference. “(Others) will say it’s one of the greatest things that ever happened.”
“So, we really have a weird real estate market where home prices are at record highs, (and) homeowners are smiling. (But) if you ask people who are in the industry – Realtors, mortgage lenders – they’re saying, ‘This is one of the worst housing recessions I’ve ever seen.’”
Seven economists took turns assessing this year’s mysterious real estate market at the National Association of Real Estate Editors conference in Austin, Texas.
With slides, charts and statistics, he noted the same factors: home sales are very low, and costs and interest rates are very high.
A year ago, economists said the picture was bleak as home sales fell to a 30-year low. However, things could improve in 2024, he predicted.
Rather, 2024 becomes “the year of the master lie,” said Selma Hepp, an economist at real estate information company CoreLogic.
“We started the year expecting a recovery in the housing market, and it’s turned out to be that,” he said.
Highlights of what the economists had to say are listed below.
household expenses
Despite high interest rates and affordability-demanding conditions, home prices are projected to rise 5.7% this year, up from 3.9% in 2023, according to Hepp.
However, Odetta Kushi, deputy economist at First American Financial, said home price growth is expected to slow during the second half of the year. Price growth will be “slow” due to the increase in stock for sale and lack of demand due to higher prices and limited affordability, Kushi said.
home gross sales
Yun projected that U.S. home sales will grow in 2024 and 2025, reaching pre-COVID levels by 2026.
He estimated that more than 5 million new and existing homes will change hands this year, down from 4.8 million in 2023. He said that every year around 6 million households will join hands with each other.
The increase in home construction over the past few years has led to an increase in the stock for sale while the existing home stock has declined. NAR data shows that 30% of apartments on the market this year are made up of new homes, up from 16% before the pandemic.
Alternatively, a contemporary shade in the residence may be the exact opposite of that pattern.
loan fee
In the peak year, housing economists predict loan interest rates for a 30-year loan will fall from an average of 6.8% to just above 5% this year. However, home loan rates have moved slightly higher to 6.9% so far this year after a cut in the upcoming Fed store suspension.
No economist gave a loan price forecast for the next 12 months.
Affordability
Prime house prices and persistently high loan rates are pushing the limits for first-time homebuyers.
Daily loan rates for the U.S. home buyer have risen 82% to about $1,700 a month in the year before the pandemic, data from CoreLogic shows.
home owner
Homeowners are “sitting on a lot of equity,” Kushi said of homes worth more than the amount owed on the loan. 42% of American citizens have their homes sovereign and sunny.
He said those who are unaffected by higher loan fees should opt to take a boost and buy a new home. Alternatively, most homeowners are boomers who grew up on the playground.
Homeowners with loans have about $17 trillion in equity, Hepp said, bringing the total of immediate equity for all homeowners to about $32 trillion.
Hepp said this increase in fairness contributes to a “lock-in effect”, limiting the choice of homes in the market. “They don’t want to face capital gains (tax) because of the equity gains,” he said.
Unmarried homeowners must pay tax on income over $250,000 when they sell their home, transient married couples must pay tax on income over $500,000.
Traders
Hepp said merchants accounted for about 30% of single-family home purchases this year, up from about 20% before the pandemic.
“The number of investors’ purchases has reduced due to lower overall sales, (but) their share (in purchases) remains high,” he said.
flats
Then again, while traditionally peaking, construction permits for new housing are slowing, even though an estimated 4.3 million new dwellings will be needed by 2035, said Caitlin Sugrue Walker, vice president of research for the National Multifamily Housing Council.
location of work structures
Richard Barkham, global economist at industrial real estate brokerage CBRE, said a downturn in the administrative center market won’t tear the economy apart because banks have reserves to protect them from real estate losses.
Workplace occupancy is declining as the pandemic has fueled remote work, causing some construction owners to default on their loans. And according to research and data agency MSCI, more than $100 billion of administrative center loans are due to come in that year.
Barkham doesn’t expect a “wave of defaults,” however.
If the structures are generating a source of income, Barkham said, banks will “grow and raise,” meaning they can increase lending despite any potential financial crisis.
Lenders don’t really want to repossess an entire portion of real estate. …They don’t want to manage real estate. They don’t want anything to do with real estate,” he said. “Defaults are rising, but widespread fire sales in commercial real estate are not.”
Discover more from news2source
Subscribe to get the latest posts sent to your email.
