Bank of America economists issued a report on Thursday cautioning against "potential turbulence ahead" for the 2024 national housing market, while dismissing theories of another crash.
The report, written by U.S. economists Jeseo Park and Michael Gapen, cited a number of factors that could lead to a slowdown in the housing market next year, including rising interest rates, inflation, and a potential recession.
"We think the (housing recessions of the) 1980s are a better analogy for today's market than the 2008 housing crash," Park and Gapen wrote. "In the 1980s, soaring inflation drove the U.S. Federal Reserve to double mortgage interest rates, peaking at 18.6% in 1981 as the country's all-time high. While this increase helped cool inflation, it caused a steep fall in economic activity."
The Fed has already raised interest rates several times this year in an effort to combat inflation, and is expected to continue doing so in the coming months. This could make it more expensive for borrowers to buy homes, and could lead to a decline in demand.
In addition to rising interest rates, the economy is also facing the headwinds of inflation and a potential recession. Inflation is at a 40-year high, and is eating into consumers' purchasing power. A recession could also lead to job losses and a decline in consumer confidence, both of which could have a negative impact on the housing market.
Despite these challenges, the Bank of America economists do not believe that a housing crash is imminent. They note that the housing market is on much stronger footing than it was in 2008, when the subprime mortgage crisis led to a widespread collapse in home prices.
"Today, homeowners have more equity in their homes, and lenders have tightened their lending standards," Park and Gapen wrote. "As a result, we believe that the housing market is less likely to experience a sharp decline in prices."
However, the economists still warn of "potential turbulence" in the housing market next year. They predict that home price growth will slow significantly, and that sales could decline as well.
"We expect home price growth to slow to 3% in 2024, down from 10% in 2023," Park and Gapen wrote. "We also expect home sales to decline by 5% in 2024."
The Bank of America economists' report is in line with other forecasts for the 2024 housing market. The National Association of Realtors (NAR) predicts that home price growth will slow to 5% next year, while the Mortgage Bankers Association (MBA) predicts that sales will decline by 3%.
The slowdown in the housing market is expected to have a ripple effect throughout the economy. The housing market is a major driver of economic growth, and a slowdown could lead to job losses in the construction and real estate industries.
Consumers could also be hurt by a slowdown in the housing market. Homeowners who are planning to sell their homes may have to wait longer and accept a lower price. And homeowners who are refinancing their mortgages may find it more difficult to do so.
Overall, the Bank of America economists' report is a warning sign for the 2024 housing market. While a crash is not likely, homeowners and potential buyers should be prepared for a slowdown in the market.
What to Expect in the 2024 Housing Market
For homeowners, the 2024 housing market is likely to be a year of transition. Home price appreciation is expected to slow significantly, and sales may decline as well. This could make it more difficult to sell a home, and could also lead to lower appraisals.
Homeowners who are planning to sell their homes in 2024 should be prepared to wait longer to sell, and may have to accept a lower price. They should also get their homes in good condition before putting them on the market.
For potential homebuyers, the 2024 housing market could be a good time to buy. Home prices are expected to stabilize, and there could be more inventory available. However, interest rates are expected to continue to rise, which could make it more expensive to borrow money to buy a home.
Potential homebuyers should be prepared to shop around for the best mortgage deal, and should also be prepared to make a down payment of at least 20%. They should also be aware that the housing market is still competitive, and they may need to make an offer quickly.
Tips for Homeowners and Buyers in the 2024 Housing Market
Here are some tips for homeowners and buyers in the 2024 housing market:
For homeowners:
Get your home in good condition before selling. Make any necessary repairs and updates, and declutter and stage your home.
Price your home competitively. Get a pre-market appraisal to get a sense of what your home is worth.
Be prepared to negotiate. Buyers are likely to be more cautious in the 2024 housing market, so be prepared to negotiate on price and other terms.
Be patient. It may take longer to sell your home in the 2024 housing market, so be patient and don't get discouraged.
For buyers:
Get pre-approved for a mortgage before you start shopping for a home. This will show sellers that you are a serious buyer and that you are qualified to borrow money.
Work with a real estate agent who is experienced in the 2024 housing market. A good agent can help you find the right home and can negotiate on your behalf.
Be prepared to act quickly. The housing market is still competitive, so be prepared to make an offer quickly on a home that you like.
Don't overspend. Just because home prices are expected to stabilize in 2024 doesn't mean that you should overspend on a home. Make sure that you can afford the monthly payments and that you have a down payment of at least 20%.
The 2024 housing market is likely to be a year of transition. Home price appreciation is expected to slow significantly, and sales may decline as well. However, this could be a good time to buy or sell a home, depending on your individual circumstances.
If you are planning to buy or sell a home in 2024, it is important to be prepared for the changes that are likely to occur. By following the tips above, you can increase your chances of success in the 2024 housing market.
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