U.S. home prices are expected to rise modestly in 2024 despite tight supply and anticipated Federal Reserve rate cuts, with affordability improving but still strained. Prices remain over 50% higher than pre-pandemic levels, driven by homeowners holding onto low mortgage rates, and are projected to increase by a median of 5.4% next year.
U.S. home prices will rise relatively modestly this year and next despite tight supply and expected U.S. Federal Reserve interest rate cuts, according to housing analysts polled by Reuters who said purchasing affordability will improve but would remain strained.
Forecasts for U.S. house prices have barely changed since the previous survey three months ago, despite more aggressive expectations in financial markets for interest rate cuts, suggesting this upswing will be more subdued than in the recent past.
Average property prices in the world’s largest economy fell only about 7% since the central bank raised rates by 525 basis points to the current 5.25%-5.50% range, and are still more than 50% higher than pre-pandemic levels. Much of that price appreciation has to do with homeowners who have locked in low 30-year mortgage rates – most under 5% and some even below 3% – and who are unwilling to part ways with their homes on such cheap deals.
That, coupled with expectations the Fed will start cutting rates in September and by a total of 75 bps by year-end, will help underpin a market already constrained by a lack of adequate supply.
U.S. home prices based on the S&P CoreLogic Case-Shiller composite index of 20 metropolitan areas (USSHPQ=ECI), opens new tab are expected to rise a median 5.4% in 2024, according to an Aug. 19-29 Reuters poll of nearly 30 property analysts.
