The housing market in the United States is struggling with high home prices and elevated mortgage rates, but experts say it is unlikely to see relief anytime soon.
Homebuyers in the US have been struggling with an increasingly expensive housing market. The median home sale price soared to $397,954, marking a 4.9% increase from the same period last year. It is also the highest sale price recorded ever. In addition to high home prices, mortgage rates have also remained in the 7% range.
The high housing costs have led to an increase in foreclosure activity in the US. In a midyear report, more than 177,400 properties across the country had foreclosure filings, including default notices, scheduled auctions, or bank repossessions.
Buyers are now increasingly being priced out of the market, and industry experts say the situation is unlikely to change in the second half of 2024.
"The U.S. housing market is stuck, and we are not convinced it will become unstuck anytime soon," Bank of America (BofA) economists Michael Gapen and Jeseo Park wrote in a report.
What To Expect in the Second Half of 2024
One of the factors causing high home prices is the lack of supply in the market. Unfortunately, the inventory is likely to remain small for the remainder of 2024, according to a forecast from Goldman Sachs. In fact, economists for Goldman Sachs expect existing home sales to drop to the lowest levels recorded in about three decades.
Home prices are also expected to increase a further 3.9% this December due to limited housing supply, the report added. According to BofA's forecast, home prices are likely to increase by about 4.5% this year, with prices remaining elevated into 2025.
Furthermore, economists at BofA believe the lock-in effect would hang on for another six to eight years. Mortgage rates are also unlikely to come down significantly, giving homeowners fewer incentives to sell their current homes. This, in turn, keeps inventory tight for homebuyers.
Should the Federal Reserve cut its benchmark rates, mortgage rates may only fall by 0.50% to 0.75%.
