Housing Market Plot Twist

As we enter 2024, the housing market narrative unfolds like a tale of shifting landscapes. Picture this: a market once feverishly competitive, now easing into a rhythm more favorable to those who dreamt of owning a home yet found it just out of reach.

The Plot Twist: A Market Cooling Down: 2024 is poised to be the year when homebuyers catch a much-needed break. After a period of soaring prices, Redfin forecasts a 1% decline in home prices during the prime selling seasons of the second and third quarters.

This anticipated dip, a first since 2012, barring a brief period in early 2023, signals a relief from the high-pressure cooker that was the housing market of the past years.

Rates Drop & New Listings Surge: With mortgage rates hovering around 7% in the first quarter and expected to gradually fall to 6.6% by year-end, sellers are emerging from the shadows of rate lock-in.

With the Federal Reserve expected to loosen monetary policy, mortgage rates are set to adjust. Realtor.com forecasts the 30-year fixed mortgage rate to average around 6.8%, a slight drop from the previous year's highs. Logan Mohtashami from HousingWire adds that mortgage rates could fluctuate between 7.25% and 5.75%. This potential rate decline could alleviate pressure on homebuyers racing against rising borrowing costs.

This influx of new listings, rising from 2023's record lows, is set to rejuvenate the market dynamics, offering more choices to potential buyers.

Sales Set to Soar: As prices mellow and listings increase, home sales are anticipated to rise by 5% compared to the previous year, with projections of reaching 4.3 million sales by the end of 2024. This upswing in sales starkly contrasts the momentum loss observed in 2023, painting a picture of a market regaining its vitality.

Fannie Mae forecasts that total home sales will jump to 4.8 million, driven by a gradual recovery in existing home sales. They expect a modest economic downturn, causing a slight decline in new home sales but not significantly impacting long-term construction volumes.

Renting Redefined - The New American Dream: An interesting subplot in 2024's housing market story is the changing perception of renting. With nearly one in five millennials believing homeownership might not be in their cards, the demand for larger rental units is expected to surge, especially among young families. This shift is attributed to the high costs and efforts associated with homeownership, leading many to embrace the flexibility and financial freedom renting offers.

The Political Backdrop - Housing Affordability as an Election Issue: The housing market's trajectory isn't just a matter of economics; it's also a political narrative. With home prices rising over 20% since President Biden took office, housing affordability has become a significant issue, potentially influencing the upcoming election. Both parties are likely to propose housing policies targeting affordability, with Democrats focusing on subsidies and zoning reforms and Republicans on reducing development regulations.

2024 is shaping up to be a transformative year in the housing market, marked by a shift towards buyer-friendliness, an increase in listings and sales, a redefined approach to renting, and a heightened political focus on housing affordability.

HEADLINES

Apartment Starts Crash: November saw a dramatic 33.7% year-over-year drop in starts for buildings with five or more units, dipping to 404,000, despite a modest 8.9% increase from October. Permits and completions for these multifamily units also experienced notable shifts, with a 21.3% drop in permits but a 26.5% increase in completions. In stark contrast, the single-family sector enjoyed a surprising resurgence, with a 42.2% increase in starts. This shift is primarily attributed to lower interest rates and a tight resale market. (Multifamily Dive)

…Which Will Lead to Rent Relief: Thanks to a surge in new supply pushing up vacancy rates and curbing landlords' ability to hike prices, rent relief is projected for 2024. After years of steep rent increases, including a more than 20% rise during 2021 and 2022, rent growth moderated in 2023 and is projected to stay in the low single digits this year. This shift brings some ease to tenants who have been stretched thin financially. However, affordability remains a significant concern, with many renters now spending around 32% of their income on housing, a threshold considered "cost-burdened." The real estate market for landlords, who previously enjoyed substantial profits from high rent hikes, is also changing. Investor interest has declined due to higher interest rates reducing property values, evidenced by a 68% drop in apartment building sales and a 12% decrease in property prices in November. (WSJ)

What Happens When You Ban Airbnb: In 2024, the hotel industry is gearing up for significant expansion, driven by a robust recovery in group bookings and revenue. Major chains like Marriott and Hyatt are witnessing a surge in demand, particularly in large meetings and events, across key U.S. cities. This resurgence is also evident in smaller regional meetings and educational events, contributing to the overall growth. Newly opened hotels are strategizing to capture this increasing market, focusing on business and social groups. With notable growth in tertiary markets and urban centers, the industry is set for a landmark year, marked by higher group revenues and an optimistic outlook for expansion. (CoStar)

BY THE NUMBERS

$117B: This is how much office debt matures in 2024 amidst a backdrop of soaring interest rates and declining revenues. Many of these loans, taken out when interest rates were significantly lower, are now at risk of defaulting, potentially leading to a banking crisis and further economic turmoil. A striking example is Manhattan's Seagram building, which has underperformed in revenue generation compared to its initial loan assumptions. The situation is exacerbated by a shift in work culture post-pandemic, with many businesses downsizing physical office spaces as remote work persists. This shift has led to an alarming 40% of office loans being underwater. (Daily Mail)

51%: Of those over the age of 50 plan to downsize their homes, pointing to a massive change coming for the housing market as baby boomers enter their 60s. Analyst Meredith Whitney predicts that this demographic change, with 10,000 people turning 65 daily, could lead to an increase in older Americans selling and downsizing their homes. This trend is likely to grow as by 2030, 21% of the U.S. population will be over 65, a group that currently represents 74% of U.S. homeowners. With the AARP estimating that 51% of people over 50 downsize, around 30 million homes could enter the market, potentially surpassing the peak of 7 million transactions in 2005. This shift is expected to start in the latter half of 2024 and continue for several years, reshaping the housing market and possibly leading to regional variations in home prices. (HousingWire)

LIGHTER SIDE

When You Run Out of Dry Land: I guess Canada and the U.S. just really like those weird-looking deep-sea fish. The US has gone full monopoly mode, extending its territorial claims over a cool 1 million square kilometers of Arctic and Atlantic seabeds. Dry land was so last season; now it's all about those seabed acres. Under the 1982 United Nations Convention on the Law of the Sea, the US is playing its "I call dibs" card, eyeing everything from rare earth minerals to Santa's secret stash. But hold up, they haven't even signed the treaty yet! While they assert their rights like a boss, other countries are probably side-eyeing this move. Canada, you might want to get in line 'cause the seabed gold rush is on, and it's every country for itself in this aquatic Wild West. (National Observer)