Moderate House Price Increases Expected as Market Adjusts to High Rates

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Veros Real Estate Solutions (Veros®), an industry leader in enterprise risk management and collateral valuation services, released its 2024 Q1 VeroFORECAST^SM, with projections indicating an average nationwide appreciation of 2.9% over the next 12 months. This is an upward revision from last quarter’s forecast of 2.4%.

VeroFORECAST^SM evaluates home prices in over three hundred of the nation’s largest housing markets, and Veros is committed to the data science of predicting home value based on rigorous analysis of the fundamentals and interrelationships of numerous economic, housing, and geographic variables pertaining to home value.

The prediction of a 2.9% increase in home prices over the next year comes amid a backdrop of low housing inventory and resilient demand despite elevated mortgage rates. Rates are expected to hover above 6.5% throughout 2024 due to inflation exceeding the Federal Reserve’s 2% target and a strong labor market, although displaying some signs of softening.

Even with the high prices and mortgage rates, overall house prices are still trending up, driven by competition among homebuyers in the face of scarce listings. Further, millennials, the nation’s largest demographic, are stepping into their prime home-buying years, further amplifying demand. Though current mortgage rates exceed those of 2020-2021, they remain moderate in contrast to the daunting rates of the 1980s and 1990s.

Looking ahead, the constrained housing supply will be influenced not only by financial factors but also by personal ties to homes and demographic shifts, such as Baby Boomers opting to age in place. Stringent lending regulations, a departure from the lax practices of the 2008 crisis, mitigate the risk of widespread defaults, ensuring market stability.

The confluence of already high home prices and interest rates poses a formidable challenge for many buyers, particularly first-time homebuyers, underscoring affordability as a pivotal concern in the 2024 housing landscape. Consequently, buyers are gravitating towards smaller metros in the Northeast and Midwest, drawn by a blend of affordability, robust job markets, and lifestyle allure.

The 10 strongest performing markets, poised for appreciation between 6%-7.5% over the next 12 months, predominantly hail from the Northeast and Midwest, boasting proximity to major metros and burgeoning opportunities catalyzed by the work-from-home trend. These include three in Pennsylvania -Lancaster, Reading, and Harrisburg; one in upstate New York – Rochester; two in New England – Manchester, NH; and Hartford, CT; and the remaining four in the Midwest – Rockford, IL; Grand Rapids, MI; Topeka, KS; and Indianapolis, IN.

Conversely, the ten weakest markets anticipate a mild depreciation over the next 12 months, ranging from -1% to -3%, with several metros, such as some of those in Texas, Louisiana, and Kentucky, grappling with elevated unemployment rates and failing to attract new residents. Previously bustling markets like Austin are experiencing a slowdown due to shifting economic dynamics related to affordability challenges and a less competitive job market. The interplay of supply, demand, and economic factors continues to shape the housing market narrative, underscoring the importance of localized insights amidst broader trends.

Contacts

Heather Zeller, Vice President of Marketing
Communications@veros.com
(714) 415-6300

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