Real Estate Market in the United States 2024: Trends and Outlook

The real estate market is experiencing significant fluctuations, with the situation varying considerably from one country to another. This article focuses on the state of the real estate market in the United States in 2024, a reality quite different from what can be observed in Switzerland or other countries. Facing changing mortgage rates, limited supply, and continuously rising prices, actors in the American real estate market find themselves navigating a complex environment. In the following, we will explore current trends, affordability challenges, and forecasts for the coming year, while providing practical strategies for American buyers and sellers.

Introduction

The American real estate market continues to cause concern in 2024. Recent changes, notably fluctuating mortgage rates, limited inventory, and price pressures, have redefined the experience for buyers and sellers in the United States. In this article, we examine the current state of the American real estate market, affordability challenges, and predictions for 2024-2025.

I. The Current Situation: Mortgage Rates and Home Prices in the United States

In September 2024, the US Federal Reserve cut interest rates by 50 basis points. This decision, the first cut in more than four years, led to a decline in mortgage rates, which recently reached their lowest level since February 2023. However, while this decline is a positive development for buyers, rates remain high compared to historical standards in the United States.

In parallel, home prices in the United States continue to rise, albeit at a slower pace. According to the S&P CoreLogic Case-Shiller Home Price Index, US home prices increased by 5.4% year-over-year in June. Although this increase is slightly lower than the 5.9% recorded in May, prices are still hitting record highs, making homeownership difficult for many potential American buyers. Experts expect prices could stabilize toward the end of 2024 as inventory increases, but no substantial decline is expected in either 2024 or 2025.

Lisa Sturtevant, Chief Economist at Bright MLS, emphasizes that "upward pressure on home prices makes this real estate market the most unaffordable in history" in the United States. Buyers, while having some bargaining power in the current context, will continue to face challenges in 2024 and beyond.

II. Housing Inventory: Supply Remains Low in the United States

Despite some signs of improvement, housing inventory in the United States remains limited, well below the levels observed before the pandemic. Stock increases are occurring gradually, but the situation remains critical. Many current homeowners are "locked in" with ultra-low mortgage rates and are reluctant to sell, knowing they would have to trade up to higher rates in a market where home prices remain elevated.

New home construction in the United States provides some relief, but it is insufficient to bridge the inventory deficit. New construction is at its highest level since 2008, but it is still not enough to meet growing demand. Thus, the American real estate market continues to be dominated by limited supply, which further fuels the rise in home prices.

III. Affordability Challenges

The real estate market in the United States in 2024 is undoubtedly one of the most unaffordable in recent history. Even if mortgage rates tend to decline and home listings see price cuts, purchasing power remains out of reach for many potential buyers. Part of this challenge stems from recent changes in industry practices, such as the new rules imposed by the National Association of Realtors (NAR). These imply that buyers are now more likely to have to pay broker commissions, further impacting their budgets.

With home prices continuing to climb and mortgage interest rates, while lower, still remaining high, most moderate-income American families struggle to consider homeownership. The NAR's Housing Affordability Index confirms this reality, indicating a preliminary reading of 93.3 in June – the lowest level this year in the United States. An index below 100 means that a median-priced home is unaffordable for an average family.

IV. Strategies for Buyers and Sellers in the American Real Estate Market

In this context, American buyers and sellers must adopt astute strategies to optimize their real estate transactions:

For Buyers:

• Understand your budget: Rather than focusing solely on the price, it is essential to calculate what you can afford in terms of monthly payments. This includes not only the cost of the home, but also mortgage rates, property taxes, and insurance.

• Be flexible: Buyers must sometimes consider compromises, whether in terms of house size or location. Flexibility allows you to act quickly when an appropriate property appears on the market.

• Monitor the market: Keeping a close eye on local inventory and price trends helps in making informed decisions. A real estate agent can be a valuable asset in this process.

For Sellers:

• Research comparable prices: Sellers must be well-informed about the prices of similar homes in their area in order to set a competitive price.

• Enhance your home's appeal: A home in excellent condition with a polished "online presence" is an asset. Buyers look for well-maintained properties with strong visual appeal.

• Work with a local agent: A real estate agent with in-depth knowledge of the local market can offer valuable advice and help close a sale at the best price.

V. Outlook for 2025: A Slight Rebalancing in the United States?

Experts predict that 2025 could be a "better" year for the U.S. real estate market, but not necessarily a "great" one. The market will remain competitive, although mortgage rates are expected to continue to decline slightly, which could somewhat improve affordability.

However, expectations for a significant drop in U.S. home prices are low. Pent-up demand, fueled by a generation of Millennials entering their home-buying years, and wage growth are factors that will support housing demand in 2025. Yet, due to limited supply and mortgage rates not expected to return to historically low levels, buyers will need to remain realistic about their expectations.

VI. Conclusion: Buy Now or Wait?

Buying a home in the United States in 2024 or waiting until 2025 remains a highly personal decision. Current market conditions, while inhospitable for many buyers, could deteriorate or improve moderately. Experts advise not to focus solely on market fluctuations, but rather to consider one's needs, financial capacity, and long-term goals.

Waiting for 2025 may carry risks, particularly if mortgage rates fall rapidly and trigger a new wave of demand, making the market even more competitive. For those who are ready, the opportunity to buy and start building equity remains an option to be seriously considered.

Thus, the 2024 U.S. real estate market is marked by affordability challenges, limited supply, and declining mortgage rates. Patience and strategy are the keys to navigating this difficult market, whether you are a buyer or a seller.

Ramzi Chamat

OAKS GROUP SA