Dec 08 2024 5 mins 1
The US housing industry is currently experiencing a slowdown, driven by high mortgage rates and a persistent shortage of housing units. According to recent data, home sales have remained subdued despite mortgage rates hitting 2-year lows in September. Total home sales fell 0.2% in September, with existing home sales at their lowest level since October 2010[3].
House price appreciation has also slowed significantly, with the S&P/Case-Shiller seasonally-adjusted national home price index rising by a modest 3.8% year-over-year in January 2023, a sharp slowdown from the prior year's 19.28% increase[1]. The Federal Housing Finance Agency (FHFA) House Price Index reported a 4.3% increase in house prices between the third quarter of 2023 and the third quarter of 2024, with a 0.7% increase from the second quarter of 2024[5].
The housing market continues to be plagued by a shortage of housing units, with an estimated 3.7 million unit shortage as of Q3 2024[3]. Despite adding 5.8 million housing units over the past four years, housing demand has increased by almost the same amount, resulting in little progress in reducing the housing shortage.
In response to these challenges, builders are using sales incentives to make new homes more attractive to potential buyers. Homebuilder confidence has inched up for the second consecutive month, but remains below 50, indicating that building conditions are expected to remain poor in the near term[3].
Industry leaders are also shifting their focus to multifamily and rental properties, with respondents to Deloitte's 2025 commercial real estate outlook survey expressing optimism about leasing conditions for residential properties, including build-to-rent single-family, student housing, and senior housing[2].
Regulatory changes are also on the horizon, with the US Federal Reserve expected to make two rate cuts by the end of 2024 and another four cuts in 2025, which could lead to a more favorable interest rate environment for the housing industry[2].
In conclusion, the US housing industry is currently facing significant challenges, including high mortgage rates and a persistent shortage of housing units. However, industry leaders are responding to these challenges by shifting their focus to multifamily and rental properties, and regulatory changes may lead to a more favorable interest rate environment in the near future.
House price appreciation has also slowed significantly, with the S&P/Case-Shiller seasonally-adjusted national home price index rising by a modest 3.8% year-over-year in January 2023, a sharp slowdown from the prior year's 19.28% increase[1]. The Federal Housing Finance Agency (FHFA) House Price Index reported a 4.3% increase in house prices between the third quarter of 2023 and the third quarter of 2024, with a 0.7% increase from the second quarter of 2024[5].
The housing market continues to be plagued by a shortage of housing units, with an estimated 3.7 million unit shortage as of Q3 2024[3]. Despite adding 5.8 million housing units over the past four years, housing demand has increased by almost the same amount, resulting in little progress in reducing the housing shortage.
In response to these challenges, builders are using sales incentives to make new homes more attractive to potential buyers. Homebuilder confidence has inched up for the second consecutive month, but remains below 50, indicating that building conditions are expected to remain poor in the near term[3].
Industry leaders are also shifting their focus to multifamily and rental properties, with respondents to Deloitte's 2025 commercial real estate outlook survey expressing optimism about leasing conditions for residential properties, including build-to-rent single-family, student housing, and senior housing[2].
Regulatory changes are also on the horizon, with the US Federal Reserve expected to make two rate cuts by the end of 2024 and another four cuts in 2025, which could lead to a more favorable interest rate environment for the housing industry[2].
In conclusion, the US housing industry is currently facing significant challenges, including high mortgage rates and a persistent shortage of housing units. However, industry leaders are responding to these challenges by shifting their focus to multifamily and rental properties, and regulatory changes may lead to a more favorable interest rate environment in the near future.
