Could a collapse in the U.S. housing market wreck the nation’s economy in 2023-2024, like it did in 2008? Financial experts are publishing their predictions amid a troubling backdrop of elevated home prices and high mortgage rates. Some of these forecasts are quite alarming, to say the least.
Surely, you’ll recall the Federal Reserve hinting at a “higher for longer” interest rate policy at last month’s Federal Open Market Committee (FOMC) meeting. The upward pressure on mortgage interest rates has been unmistakable. This begs the question of what’s in store for the housing market and how stock investors can prepare for what’s coming.
Housing Market Alert: Expect Home Prices and Mortgage Rates to Rise in 2024
As we embark on the final quarter of 2023, all eyes are turning to 2024. Understandably, people want to know what to expect in the housing market. Suffice it to say home prices and mortgage rates are very likely to increase.
They’re already elevated, to put it mildly. Believe it or not, the median sale price of an existing home in the U.S. reached $406,700 in July. That figure is only $7,000 less than the all-time high.
Furthermore, the average annual interest rate for a 30-year mortgage reached 7.36% in late August. And with few signs that the “higher for longer” interest rate policy will end soon, housing could become even less affordable.
So, what are the experts predicting? National Association of Realtors (NAR) Chief Economist Lawrence Yun expects home prices to increase by around 3% to 4% in 2024. Meanwhile, the supply of houses is “likely to remain below what we would deem a balanced market,” according to Chen Zhao, who leads the economics team at Redfin.
Experts with Zillow see home values increasing by 3.4% in 2024. Moreover, the National Association of Home Builders anticipates that America’s housing shortage will persist through the end of this decade.
On the other hand, Moody’s Analytics and Morgan Stanley both expect that U.S. home prices will decline slightly in 2024. This just goes to show that consensus is, as always, hard to find on Wall Street.
What You Can Do About It
Should you prepare for a housing market collapse in 2024? Not necessarily, though real estate buyers and sellers need to factor in elevated home prices and mortgage rates.
This might involve altering your budget for the next year. At the same time, it’s not a bad idea to cut back on real estate stocks. Two clear-cut examples would be Realty Income (NYSE:O) and Rocket Companies (NYSE:RKT). Finally, always keep an eye on the Federal Reserve for hints about future interest rate policy changes.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.