Housing Market May Be Headed for a Shift

_{Omar Mohammed is a Newsweek reporter based in the Greater Boston area.}

A strong U.S. economy will be a boon for the housing market, Mortgage Bankers Association's (MBA) chief economist said on Thursday, as it will buoy demand and as inflation continues to fall, mortgage rates will decline as well making home loans more affordable for buyers.

The U.S. economy accelerated at a faster-than-expected clip in the fourth quarter of 2023 at 3.3 percent, the Commerce Department's Bureau of Economic Analysis revealed on Thursday.

Meanwhile, the personal consumption expenditures (PCE) price index—the Federal Reserve's preferred measurement of inflation's progress—jumped by 1.7 percent during the quarter. Core PCE, which excludes the often volatile food and energy prices, increased by 2 percent.

These dynamics bode well for the housing market that has been struggling under the weight of record-high mortgage rates, sparked in part by the Fed's hiking of rate at the most aggressive clip since the 1980s to fight soaring inflation.

The Fed's funds rate currently sits at 5.25 to 5.5 percent—the highest they have been in two decades—and policymakers have signaled that they will slash rates should inflation come down to their 2 percent target.

But an economy that may avoid a recession as inflation moderates without the Fed's tight monetary policy doing too much damage to the jobs market would help the housing sector.

"Stronger economic growth will benefit the housing market, keeping demand robust," Mike Fratantoni, MBA's chief economist, said in a statement shared with Newsweek. "Moreover, today's report also showed further reductions in inflation, which will enable the Federal Reserve to cut rates later this year—as they have been hinting."

Mortgage rates ticked up slightly for the week ending January 25, Freddie Mac said on Thursday, with the 30-year fixed rate averaging 6.69 percent.

"The 30-year fixed-rate has remained within a very narrow range over the last month, settling in at 6.69% this week," Sam Khater, Freddie Mac's chief economist, said in a statement.

Rates look to have stabilized, Khater suggested, encouraging buyers to jump off the fence.

"Despite persistent inventory challenges, we anticipate a busier spring homebuying season than 2023, with home prices continuing to increase at a steady pace," he said.

A slowdown in rates could have a negative impact on home buyers, some analysts say.

A decline in the cost of home loans would encourage more purchases, and this increase in demand will spark competition at a time when there is a limited supply of homes for sale.

More buyers who can afford mortgages entering the market will push up prices, analysts from Goldman Sachs said this week.

The investment bank's experts project prices to soar by 5 percent in 2024, a marked revision from their earlier expectation of a 2 percent jump. That trend will continue through next year when prices are forecast to increase by nearly 4 percent, which is also a change from a previously estimated increase of close to 3 percent.

Amid the price increases, Goldman Sachs analysts anticipate that rates will fall to 6.63 percent for the year. This drop in rates from the near 8 percent highs of November 2023, will make house loans more affordable, sparking more demand for properties.

"We have very low inventory of houses for sale, which is generally supportive of prices, along with generally stable demand that is coming from things like household formation," Roger Ashworth, senior strategist on the structured credit team at Goldman Sachs, said this week.

On Thursday, new home sales climbed up by 8 percent in December, according to government data, while prices declined to two-year lows. The fall in prices and a rise in sales was partly due to builders offering inducements to buyers, according to Yelena Maleyev, a senior economist at KPMG.

"Builders have pivoted to building smaller homes and offering more discounts and concessions, such as mortgage rate buydowns, to bring in buyers sidelined by rising mortgage rates," she said in a note shared with Newsweek.

But the data from the U.S. Census Bureau also showed that inventory of newly built homes fell last month after going up the previous months. There were 453,000 houses available for sale at the end of December, which accounts for 8.2 months' worth of supply.

This constituted a 3.5 percent decline from the same time a year ago, Maleyev pointed out.

The lack of inventory also comes at a time when the used homes market has struggled. Sales are down in that segment amid a lack of supply of homes as sellers are reluctant to give up their low rates for new home loans hovering in the mid-6 percent.

This lack of supply will be key to how prices shake out and the outlook for the year is not encouraging.

"If mortgage rates fall below 6 [percent] in 2024, more owners will feel comfortable listing their homes for sale, alleviating some of the shortages, but not enough to close the supply gap," Maleyev said.

Housing Market May Be Headed for a Shift (newsweek.com)

About the writer

Omar Mohammed

Omar Mohammed is a Newsweek reporter based in the Greater Boston area. His focus is reporting on the Economy and Finance. He joined Newsweek in 2023 and brings with him a decade of experience covering business and economics for the likes of Reuters, Bloomberg and Quartz. He also covered the Tokyo Summer Olympics in Japan for Reuters and his Guardian piece about the NBA's expansion into Africa was longlisted for The International Sports Press Association Media Awards in 2023. He has a Master's degree from Columbia University Graduate School of Journalism where he was a Knight-Bagehot fellow in 2022. You can get in touch with Omar by emailing [email protected]

Languages: English and Kiswahili.

Higher Temperatures In The Spring Will Spurr The Housing Market

NEW JERSEY — Spring could arrive early with warm temperatures in New Jersey, according to The Old Farmer’s Almanac’s 2024 spring weather forecast.

Meteorological spring starts March 1, and the spring equinox on March 19 is considered the official first day of the season.

The forecast, released Friday, suggests New Jersey will see less precipitation than usual in the third month of the year. The Old Farmer’s Almanac says it expects an early start to spring along the East Coast —most areas along the Atlantic, except for Florida, are expected to see above-average temperatures in March.

An early spring is also expected in the eastern Ohio Valley and Great Lakes, from the Deep South up into Texas and Oklahoma, on the West Coast and Alaska.

Near- to below-normal March temperatures are expected in the rest of the country. And some areas across the mid-Atlantic, Appalachians and the Rockies could get a blast of cold air and snow in March.

The look-ahead also suggests much of the eastern U.S. will see drier than normal conditions in March, but other areas should expect more precipitation than normal. The outlook also looked forward to April and May.

April

Overall, temperatures are expected to be warmer than normal in New Jersey.

Warm April temperatures are expected from New England to Florida and westward across the Deep South into Texas, as well as in areas north and west of the Pacific and much of Alaska and eastern Hawaii, according to the forecast. Everyone else should wait to pack away their sweaters and cool weather gear.

Precipitation in New Jersey is expected to be near to below normal. Overall, the forecast said, wetter than normal conditions are expected in the Southeast from southern Florida across the Deep South into the Southern Plains and northward across the Heartland and much of Alaska. Near or below normal precipitation is expected elsewhere.

May

Temperatures are expected to be warm, with not as much precipitation in New Jersey, the forecast said.

The Old Farmer’s Almanac said that nationwide, spring rains are expected to continue in the same areas expected to see above-normal precipitation in April. The near- to below-normal conditions are expected to persist elsewhere.