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Why Are House Prices Still Rising In A Difficult Year Such As 2024?

Housing Prices Still Rising. Why?

Today on LUXE BLOG, we will try to answer a question of which many people are scratching their heads over. What is it? Why are house prices still rising in 2024? Predictions for falling prices in 2022, 2023, and now 2024 have not panned out. Despite high mortgage rates and various economic uncertainties, home prices keep climbing. Let’s look at some recent data and the reasons behind this trend. Enjoy!

Mortgage News Daily Report

Mortgage News Daily highlighted that home prices seem unaffected by high rates. The Case-Shiller Home Price Index, though delayed by three months, shows a continued upward trend. Here’s a breakdown:

  • Non-seasonally adjusted gain: 6.4% annual increase in February.
  • 10-city composite increase: 8%, up from 7.4% in January.
  • 20-city composite increase: 7.3%, up from 6.6% in January.

Major cities are seeing significant gains:

  • San Diego: 11.4% increase.
  • Chicago and Detroit: Nearly 9% growth.
  • Portland: 2.2% growth.

These numbers indicate a resilient market despite high mortgage rates.

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Nationwide Trends

According to Redfin, for the first time in nearly two years, there’s no major American metro where home prices are falling. Nationwide, the median sales price rose to almost $383,188, up 4.8% year-over-year. This is happening alongside increasing mortgage rates, impacting the median monthly housing payment, now at a record $2,890.

Greater Phoenix Market Snapshot

The Cromford Report provides insights into the Greater Phoenix area:

  • All-time high sales price per square foot: $398.95.
  • Constrained supply: Lack of excess supply is preventing price drops.
  • Listings on the market: Around 17,700, still below normal levels from 2016-2018.

Supply constraints are a key factor in sustaining high home prices, including the Arizona real estate market.

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National Housing Gap research highlights a significant housing gap:

  • National shortage: 6.5 million homes.
  • Demand exceeds supply: More families are starting new households than homes are available.

This imbalance between supply and demand is driving prices up, regardless of mortgage rates.

Economic Influences

The Federal Reserve's recent actions and economic data also play a role:

  • FED meeting: No rate hike; future rate cuts remain uncertain.
  • Jobs report: Weaker than expected, leading to a slight decline in mortgage rates.
  • Current mortgage rates: Remain high, affecting affordability.

Adjustable Rate Mortgages (ARMs)

To combat high rates, some buyers are turning to adjustable rate mortgages:

  • ARM loan share rise: Reached 7.8% for the year.
  • Initial fixed period: Typically 5 years, offering lower initial rates.

Also Read: Analyzing Expert Predictions For The 2024 U.S. Housing Market

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Supply & Demand In Greater Phoenix

The Cromford Market Index measures supply and demand in the Greater Phoenix area. All below data was from May 2nd, 2024.

  • Balanced market: Varies by city, with some areas seeing higher demand and others higher supply.
  • Hot Seller’s market areas: Chandler, Gilbert, Glendale, Avondale, Mesa, Fountain Hills, and Phoenix (all above 150 CMI).
  • Heavy Buyer’s market areas: Goodyear, Cave Creek, Queen Creek, Maricopa, and Buckeye (all below 90 CMI).

Overall, constrained supply continues to drive prices up.

Why Are House Prices Still Rising In 2024?

In conclusion, high demand, constrained supply, and economic factors are sustaining high home prices. That's the RE story of 2024. Understanding such helps explain why predictions for falling prices have yet to materialize. Bottom line? Keeping an eye on supply and demand metrics will be necessary for future forecasts. Not to mention to future attempts to answer why house prices continue to rise in 2024 (and possibly beyond). See you next time on LUXE BLOG!

Also Read: Greater Phoenix Ranks 2nd For Price Reductions In March Report

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