U.S. Housing Market Lacks 1.5 Million Units, Says Freddie Mac
Freddie Mac's Latest Report
At Williams Luxury Homes, we aim to provide comprehensive, unbiased info regarding the housing market. As an example, just yesterday, we posted a (somewhat sobering) blog about the U.S. housing market's lock-in effect. Today? We're sharing findings from a recent Freddie Mac report. Why do we share both sides of the story? Because there is always more than one way to look at things. Regarding 'things'. Are they great? No. Does this mean everything is dead? No. Just as many factors are weakening the market, there are intrinsic factors keeping the market moving. Enjoy.
Economic Growth & Labor Market Trends
The economy has been experiencing moderate growth, with some signs of cooling in the labor market. The beginning of 2024 saw a noticeable shift in economic momentum. Despite some positive indicators, various factors have slowed down the growth pace compared to late 2023. The impact of high inflation, fluctuating consumer spending, and changes in government spending are significant.
- Q1 2024 GDP growth: 1.6%
- Q4 2023 GDP growth: 3.4%
- Weaker consumer spending
- Decline in auto and gasoline purchases
- Increased spending on services
- Moderating labor market in April
- Unemployment rate: 3.9%
These trends indicate a resilient yet slowing economy, with inflation and interest rates influencing overall growth. The labor market shows signs of moderation, reflecting a cautious optimism among employers and workers.
Also Read: How The Lock-In-Effect Is Affecting Greater Phoenix’s RE Market
Impact Of Inflation & Interest Rates
Inflation and rising interest rates are crucial factors shaping the current economic landscape. They affect everything from consumer spending to business investments. The persistent inflation and the Federal Reserve's responses significantly affect future growth and stability.
- Core PCE price index rose 0.3% in March
- Consumer Price Index increased by 0.4% in April
- Employment cost index up 1.2% Q1 2024
- Federal Reserve's rate cuts unlikely in 2024
- Persistent inflation
High inflation and interest rates are expected to continue impacting economic growth and consumer behavior. This is expected to influence how businesses and households plan their finances.
Housing & Mortgage Markets
The housing market has faced challenges due to fluctuating mortgage rates. And like we said, tight inventory. These issues create a unique environment for everyone. Understanding these changes helps stakeholders make better decisions. Here’s a detailed look at the current state:
- March home sales down 2.7% from February
- Existing home sales fell 4.3% in March
- New home sales up 8.8% in March
- Homebuilder confidence index: 51
- New residential construction down 14.7% in March
- Home prices rose 1.2% in February
Despite these challenges, the demand for new homes remains strong due to the limited supply of existing homes. This dynamic influences home prices and availability across various markets.
Mortgage Rates & Activity
Mortgage rates have risen, significantly influencing buyer behavior and overall market activity. Higher rates often discourage potential buyers and affect refinancing decisions. The following bullet points contain info regarding the current mortgage landscape:
- April average mortgage rate: 6.99%
- Mortgage activity down 1.8% month-over-month
- Refinance activity decreased by 3.3%
- Purchase applications fell 2.7% in April
Higher mortgage rates continue to pose a barrier for many prospective homebuyers, impacting the overall demand and market fluidity.
Housing Inventory & Homeownership
The housing inventory remains tight, contributing to the overall market's condition. This scarcity affects home prices and the availability of affordable housing. Here’s an overview of the current situation:
- Q1 2024 homeownership rate: 65.6%
- Historical average homeownership rate: 65.2%
- Increase in renter-occupied units
- Homeowner vacancy rate: 0.8%
- Rental vacancy rate: 6.6%
Low vacancy rates and tight inventory highlight the ongoing supply challenges in the housing market. This scarcity continues to pressure housing prices and availability.
Also Read: Why Are House Prices Still Rising In A Difficult Year Such As 2024?
Market Outlook
Looking ahead, we anticipate certain trends to shape the housing market. These forecasts help in planning and decision-making for all stakeholders involved. Predictions include:
- High interest rates to persist
- Baseline scenario: one Federal Reserve rate cut in late 2024
- Modest growth in home sales compared to 2023
- Continued high demand for starter homes
- Limited inventory impacting purchase originations
While the outlook remains cautious, high demand and favorable demographics support a positive long-term view. Stakeholders should prepare for continued tight conditions. As well as an evolving market.
Our Final Thoughts
Here on LUXE BLOG, we strive to provide HELPFUL content when we share news about Arizona. Additionally, we aim to educate readers. This helps them make better decisions. Our industry connections and experience allow us to offer exclusive opportunities to our clients. Whatever you want to do in real estate? We're here to help you confidently do it.
If you have any questions or need further assistance, please reach out. Thank you for reading LUXE BLOG.