• US Housing Market Navigates Slowdown and Affordability Challenges Amidst Economic Resilience

  • Nov 29 2024
  • Length: 3 mins
  • Podcast

US Housing Market Navigates Slowdown and Affordability Challenges Amidst Economic Resilience

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  • Summary

  • The current state of the US housing industry is characterized by a mix of challenges and opportunities. Recent market movements indicate a slowdown in home sales, with existing-home sales in September 2024 down by 3.5 percent from last year[3]. However, home prices continue to rise, albeit at a slower pace, with a year-over-year increase of 3.4 percent in September 2024 compared to September 2023[5].

    The rental market is also experiencing a softening, with an estimated 8.9-percent vacancy rate, up from 7.5 percent in 2020[1]. The apartment market, which makes up more than half of the rental supply, has a 7.5-percent vacancy rate in 2023, up from 6.5 percent in 2022[1].

    Despite these challenges, the US economy remains strong, with upward revisions to GDP growth and job growth[2]. The housing market is expected to benefit from lower mortgage rates, which have come down from their peak but are still high at 6.88 percent as of late October 2024[3]. However, the impact of lower mortgage rates on home sales is expected to be modest due to continued tightness in the existing inventory and homebuyers staying on the sidelines expecting further rate declines[2].

    The supply chain is also experiencing some shifts, with housing construction picking up in August 2024, driven by a 15.8-percent increase in single-family housing starts[2]. However, the overall number of existing homes on the market for sale remains low, with a 4.3-month supply as of September 2024, which is still short of the 5 to 6 months usually needed for a balanced market[3].

    In response to these challenges, US housing industry leaders are focusing on affordability and supply chain developments. For example, the National Association of Realtors notes that more supply is beginning to appear, which could be an early indicator of more home sales later[3]. Additionally, the Harvard Joint Center for Housing Studies emphasizes the need for a concerted effort among policymakers, nonprofits, and the private sector to address the multifaceted challenges facing the housing market, including the affordability crisis and rising homelessness[4].

    Compared to the previous reporting period, the current conditions in the US housing industry are marked by a slowdown in home sales and a softening in the rental market. However, the economy remains strong, and lower mortgage rates are expected to provide some relief to the housing market. The industry is responding to these challenges by focusing on affordability and supply chain developments, and policymakers are being called upon to address the broader challenges facing the housing market.
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