Investment bank Morgan Stanley has given their predictions for the short-term future of the US housing market.
Summary
- Past Trends: After hitting a high point in June 2022, house prices went down for a few months in 2023. However, they’ve recently started rising again in various parts of the country.
- Morgan Stanley’s View: This big financial company predicts that this rise in house prices won’t last. They say prices will drop again in 2024. Specifically, they’re expecting a 2% decline in prices next year.
- Why Did Prices Dip Previously?: In early 2023, many people wanted to buy homes but couldn’t afford them. This was because there were not enough houses for sale (a supply shortage) which had driven prices up during the pandemic.
- Recent Stats: As of May, house prices have increased for four straight months. On average, a house in the U.S. is worth $348,853, a rise of 1.2% from last year.
- Factors Affecting Prices:
- Mortgage Rates: This is the interest you pay when you borrow money to buy a home. Morgan Stanley mentioned that these rates will be crucial in deciding house prices next year. Currently, these rates are high, which makes buying a home more expensive.
- Building Activity: High rates have slowed down house building and the number of house sales. But if these rates drop, it’ll boost both house supply and demand.
- New Home Sales: Despite everything, the sale of new homes has risen by 24%. Builders are now focusing on creating affordable, smaller houses, some even built off-site.
- Differing Opinions: Not everyone agrees with Morgan Stanley. For instance, Zillow’s top economist thinks house prices will keep rising in 2024.
In Simple Words: House prices have been on a rollercoaster ride, going up and down. Morgan Stanley thinks they will go down by 2% next year, but others, like Zillow, are more optimistic. Important things to watch include mortgage interest rates and how many new houses are being built.