The 2023 housing market faced one of the same obstacles seen in 2022. Mortgage interest rates were too high compared to the growth in home sales. Now in 2024, federal reserveNow that the rate hike cycle is over, let’s take a look at what that means for housing demand and home prices. However, annual forecasts have their limitations, and in this crazy housing and economic cycle, giving annual forecasts without guidance as variables change means you are dealing with stale data. Every Saturday, we publish a weekly housing market tracker with forward-looking data and insights to help you quickly adapt to market conditions.
Here are my predictions for 2024:
10 year yield and mortgage interest rate
The 2024 10-year bond yield range is similar to 2023, but there are a few different variables to keep in mind.
- 10 year yield range: 4.25%-3.21%
- Mortgage interest rate: ~ 7.25%-5.75%
What are the important levels to watch for in the 10-year bond yield? 3.37%. Last year, we borrowed Gandalf the Gray’s catchphrase, as falling below this level requires an interruption in labor. “You must not pass.” And the 10-year Treasury yield did not exceed that level in 2023.
However, if labor and economic indicators are weak, there is a possibility that the Gandalf Line will be breached. 2.72% The rise in 10-year bond yields is having an impact leading up to 2024. This is a win for the housing market as mortgage rates could fall below 5% if spreads improve. If spreads remain bad, mortgage rates will likely be between 5% and 5%. 6%. If the 10-year Treasury yield rises above 4.25%, the U.S. economy will once again outperform. That’s similar to the 5% growth in the third quarter, when unemployment claims fell.
Below is a graph of the 10-year Treasury yield associated with 2023 inflation growth data.
This time we will talk about mortgage interest rates!
The spread between the 10-year yield and mortgage rates could improve in 2024, meaning mortgage rates could rise. 0.625%～1% Next year it will be even lower. For example, if the spread is normal, the current mortgage rate would be less than 6%. Rather, the closing price in 2023 was 6.67%. Mortgage rates could be below his 5% in 2024 if spreads return to normal and the 10-year Treasury yield reaches the lower end of its range in 2024.
The economic downturn on the labor side provides a better backdrop for lowering mortgage rates, as the Fed is no longer in rate hike mode. Unlike 2023, there are more positive variables this year that could cause mortgage rates to fall rather than rise.
If all things remain constant, the rate of home price growth in 2024 will be a repeat of what happened in 2023: low-single-digit increases in national home prices.
What causes house prices to rise faster than the low single digits? If I’m wrong and mortgage rates continue to fall for a long time and new listings don’t increase in 2024, then house prices will rise faster than in the low single digits in 2024. There is a possibility that it will accelerate further. Because we’ll be facing the same problem as before: too many people chasing too few homes.
What could cause housing prices to fall? This happens when stressed inventories spike and mortgage rates don’t fall low enough to handle the large amount of new supply into the market. For most of the past decade, mortgage rates have been in a stable range of 3.75% to 4.75%, but that hasn’t been the case lately. Therefore, this is something to consider only if you see an increase in stressed stocks.
To give you an example of what I’m talking about, new listing data was run from 2008 to 2011. 250,000 and 400,000 Weekly, peak seasonal data includes: 370,000 and 400,000.No breakover of new listing data has occurred 90,000 It will occur during the peak season of 2021, 2022, or 2023. So if you see a push in stressed new listings, you should jump on it immediately and see how the supply and demand equation plays out.
However, this discussion will not take place until the weekly data confirms that.in this episode In the HousingWire Daily podcast, we explain how housing trends have changed rapidly since November 9, 2022, with home prices back to all-time highs within months. That’s why weekly data is so important.
Existing home sales
When mortgage rates fell from 7.375% to 5.99% in early 2023, we had one of the most significant existing home sales records ever. 4 million to 4.55 million. To achieve more stable sales growth, interest rates need to be lowered. Also, in order for the number of used home sales to reach 4.72 million or more once or twice a month, the mortgage interest rate along with the period must be less than 6%.
We track purchase requisition data weekly, but I only focus on it 4.72 million Monthly print runs in 2024 are still unaffordable at such high rates, which is impacting sales.
Newly built home sales
As long as mortgage rates fall, builders can sell homes. Because we can lower mortgage rates even more than in the existing home sales market, and we have a pipeline of homes for sale. There are 106,000 new homes that haven’t even started construction yet, and only 78,000 new homes are completed and ready for sale. They manage supply slowly.
If you look at the economic cycle and the housing economy, we have a similar strategy in 2024 as we had in 2023. Let’s look at the dynamics.
I raised the last flag on the 6 recession red flag model on August 5, 2022. But by November 9, 2022, we could see that the dynamics of the housing market were changing, and if I was right, builders were about to become more proactive. about their business. Sure enough, builder confidence surveys began to increase again heading into 2023.
As mortgage rates began to rise toward 8%, builder surveys began to decline, primarily because smaller builders felt the pinch. This is a positive for the single-family home market now that interest rates have fallen again. The new home sales market has greater implications for the economy due to construction work and the purchase of big-ticket items. In contrast, commissions and truck movements are important in the used home sales market.
People are monitoring builder surveys correctly. However, builder research and new home sales have turned to increase in his 2023, and interest rates are now down almost 1.5% in his 2024, with lower interest rates once again supporting builder research. Probably.
This applies only to the single-family housing market, not the apartment market, which is experiencing a decline in activity. This is a notable point regarding labor, as some builders do not require as many people to build apartments. If interest rates remain too high for too long, they will eventually affect future production.
Talk of a recession won’t begin until the four-week rolling average of jobless claims exceeds 323,000. Until that happens, we won’t be talking about a recession today, next year, or even this decade. The history of economics shows that a labor market collapse is necessary for a job-loss recession to occur. If you’ve been following my work during COVID-19, you’ll know that I’ve talked a lot about the labor market and how household balance sheets are far better than they’ve ever been. You know the two views. Once unemployment claims break through that critical level, we’ll be able to have a full discussion about the economy and the housing market, but not yet.
Barring a credit event in the economy that tightens lending, consumers should hold out in 2024, especially if mortgage rates fall. This means home builders can sell more homes and keep construction workers employed longer. A decline in construction jobs is a staple of any job-loss recession, but we’ve avoided it so far.
I would like to emphasize that, heading into 2024, economic indicators may improve, both positively and negatively, in ways that have not been the case in the past decade. Following the weekly tracker is essential to the housing market and economy. I track this information daily so you don’t have to.
The existing home sales market has seen sales near Great Recession levels for the past 18 months. The time has come for the Federal Reserve to abandon its housing economic policy during the coronavirus era and once again turn to promoting housing. The time has come to exempt U.S. homes from COVID-19 policies and boost sales.