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Zillow's 6 biggest predictions for the US housing market in 2024

Plus, Forecasting 2024’s Top Apartment Markets and 7 more Real Estate Trends

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Real Estate Trends

Top 10 U.S. Metros with Highest Down Payment Percent for Home Purchases link

  • The U.S. saw a decline in mortgage originations in Q3 2023, marking the ninth decrease in the last ten quarters. This downturn, amid rising mortgage rates and home prices, resulted in a 26% year-over-year drop in residential lending activity.

  • Median down payments for home purchases increased significantly in Q3 2023. The median down payment was $35,050, up 12.2% from the previous quarter, accounting for 9.2% of the median home price.

  • San Jose-Sunnyvale-Santa Clara, CA, leads the top 10 U.S. metros with the highest median down payment percentage at 26.2%. This list highlights regions where homebuyers face substantial upfront costs, reflecting broader trends in the housing market.

New listings highest in over 2 years and mortgage payments drop link

  • Mortgage payments have decreased, with a notable drop from $2,739 in October to $2,575 in November. This reduction is attributed to falling mortgage rates, influenced by easing inflation and expectations of Federal Reserve rate cuts.

  • New home listings saw a significant increase of 6% year-over-year in November, the largest since summer 2021. This surge indicates a potential easing of the housing market's supply crunch, offering more options for buyers.

  • Despite recent improvements, challenges persist in the housing market. Prices remain high, and the total number of homes for sale is down 7% from last year. Experts suggest that if rates fall next year, the housing market could experience a strong rebound.

Pending home sales hit lowest level in more than 20 years link

  • October 2023 saw a significant decline in pending home sales, dropping 1.5% from the previous month to a score of 71.4. This marks the lowest point since the inception of the Pending Home Sales Index in 2001, reflecting a challenging housing market.

  • The decrease in pending home sales coincided with mortgage rates reaching their highest level in 20 years. Although rates have slightly retreated since then, the high rates have notably impacted contract signings for existing homes.

  • Regional variations were evident, with the Northeast experiencing a 2.7% monthly increase in pending home sales. However, other regions like the Midwest, South, and West saw declines, indicating a mixed and complex housing market landscape across the United States.

Down Payments Are Going Up link

  • The national median down payment for homes has risen to nearly 15% of the purchase price, reaching $30,400 in Q3 2023. This is a significant increase from about 12.5% or $23,300 during the same period in 2021.

  • Buyers are increasing their down payments to stand out in bidding wars, and to borrow less due to rising mortgage rates. Additionally, increased personal savings during the pandemic have enabled buyers to have more cash on hand for these larger down payments.

  • Regional variations in down payment rates are notable. In expensive Northeast metros, down payments have risen the most, particularly in areas with more international buyers. Conversely, down payments have declined in the South and western Sunbelt metros, where the pandemic real estate boom has waned. In El Paso, the median down payment decreased the most, dropping by about 1.8% to 5.6% of the purchase price.

Opportunities

Eco-Friendly Buildings Pulling in 4.2% More Rent link

  • Certified, energy-efficient buildings are commanding higher rents, up to 4.2% more. This trend is driven by their lower operating costs and increasing tenant demand for sustainable features.

  • The market's attitude towards eco-friendly buildings has shifted significantly. They are now seen as almost essential by tenants, reflecting a broader change in environmental consciousness in real estate.

  • A study by JLL highlights this trend, indicating a growing preference for buildings with energy-efficient certifications. This shift is not just about cost savings but also aligns with evolving tenant values and market expectations.

Something I found Interesting

Mortgage Rate Buydowns Are Softening the Affordability Problem link

  • Mortgage rate buydowns are becoming a key strategy for home sellers, especially builders, to enhance sales in a high-rate environment. Sellers are now often paying higher fees to lock in below-market rates for buyers, making homes more affordable.

  • In markets like San Antonio, rate buydowns have been particularly effective, with a significant percentage of mortgage loan locks at rates below 6%. This approach is proving crucial in maintaining sales momentum, especially for first-time and payment-sensitive buyers.

  • While rate buydowns offer immediate benefits, they may not be a permanent solution. The current mortgage market assumes buyers will refinance when rates drop, and there are concerns about appraisal and mortgage insurance issues in the context of these buydowns.

Pro Member Only Content

Zillow's 6 biggest predictions for the US housing market in 2024 

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  • More Homes on the Market: High mortgage rates will lead to an increase in homes listed for sale as owners and buyers adapt to the new normal.

  • Stabilization of Home-Buying Costs: The growth rate of home prices is expected to level off, potentially easing the affordability crisis.

  • Rise in Demand for Single-Family Rentals: Families will increasingly seek affordable housing options, boosting the single-family rental market.

  • Growing Rental Demand in Downtown Centers: Urban areas, especially downtown locations, will experience a surge in rental demand.

  • Decreased Competition from Flippers: With high home-buying costs, buyers will face less competition from property flippers, leading to more DIY home improvements.

  • AI Integration in the Housing Industry: Advancements in AI will streamline the home-shopping and selling experience, enhancing efficiency and insights.

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The U.S. Has a Problem With Seniors Unable to Afford Housing 

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  • The senior population in the U.S. has increased dramatically, rising 34% from 43 million in 2012 to 58 million in 2022. This growth is not limited to any specific area; it's a nationwide trend affecting urban, suburban, and rural communities.

  • This demographic shift poses a significant challenge for housing affordability for seniors. Governments and the private sector are urged to swiftly address the housing and assistance needs of this aging cohort.

  • The study by the Joint Center for Housing Studies of Harvard University highlights the urgent need for action. It serves as a call to action for both public and private entities to meet the increasing demands of America's aging population.

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Nashville added nearly 100 new residents per day in 2022. Here's why people are moving there 

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  • Nashville's population grew by about 35,624 people in 2022, averaging nearly 98 new residents daily. This growth is part of a trend since 1990, with the population increasing by 81%.

  • The city attracts people for various reasons, including job opportunities, a better quality of life, and a lower cost of living. Notably, there's no state income tax in Nashville, making it financially appealing.

  • Despite the growth, Nashville faces challenges in affordability and quality of life. The income needed to afford a median-priced home in Nashville is now higher than the national average, and many residents feel the city's growth is negatively impacting their daily lives.

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Forecasting 2024’s Top Apartment Markets 

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  • In 2024, San Jose and Richmond are projected to lead in rent growth at 4.0%, with West Palm Beach close behind at 3.9%. These increases reflect robust local income growth, with other notable cities like Anaheim, Pittsburgh, and San Francisco also showing significant rent increases.

  • Occupancy rates in 2024 are expected to be strongest in Newark, New York City, Boston, and Riverside, all surpassing 96%. These high rates are attributed to limited housing supply and dense populations, creating a favorable environment for property operators.

  • Dallas is set to dominate new housing supply in 2024, with nearly 38,000 units underway, outpacing Phoenix's 33,362 units. Other active construction markets include Austin, Denver, Charlotte, and Los Angeles, each expecting over 20,000 new rentals, indicating a robust response to growing housing demands.

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Cheers,

Vidit

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