The article examines current housing market struggles and what is forecasted for 2024 and the near future. Even though 2023 had some slight improvements in mortgage rates, affordability still remains a concern due to the high prices and inventory. The article also touches base on the different opinions and hypothesis experts have regarding the current housing market and interest rates. Some experts believe that the interest rate will begin to decline in 2024, since there was a decrease in interest rate later in Q4 of 2023. However, there are experts saying that it will remain a challenge for the housing market to gain equilibrium. With the Federal Reserve's policy influencing the mortgage rates and the potential interest rate cuts in 2024. The market will still have to deal with the lack of housing inventory and the high demand.

Article Info: Housing Market Predictions For 2024: When Will Home Prices Be Affordable Again? Link: (Media Bias: Right Center Bias) https://www.forbes.com/advisor/mortgages/realestate/housing-market-predictions/Links to an external site. Source: Forbes

 

Connection to Class: Connection to Class:

The steady fluctuations in home prices and interest rates, influences the consumer spending and investment. With increase in interest rates and prices being above market, consumers will reduce their spending; therefore, affecting the aggregate demand curve negatively. The article also discusses the current interest rates and prices which have implications on the IS-LM model. Interest rate cuts will stimulate investment and consumption creating more output, therefore, shifting the IS curve to the right.

If the housing market were to move to equilibrium at a fast rate it could cause a shock (housing market crashing) to the economy. When the housing market starts to "normalize". The housing market needs to stabilize at a steady rate because a fast drop in prices can cause the bubble to burst. However, the article mentions that many experts believe that the homeowners have better leverage than those who experience the 2008 financial crisis due to the polices that resulted from the 2008 crisis.

Additional Thoughts:

I currently work in the real-estate industry and some of the information above comes up on a daily basis. Many of my work collogues are positive that the market will improve while others are not as optimistic. Unfortunately, there is many uncertainties with the current housing market. Before covid our housing inventory relied on 2000+ homes for sale at a time, our current housing inventory is less than 500 houses (this is only within the Madison, WI premise). Many sellers don't want to sell due to the high interest rates even though there are buyers willing to buy. With interest rates lowering ever so slightly more buyers are projected to resurface within the 2024 summer market. With more buyers resurfacing, the next couple of months will have a surplus of demand while our supply will remain lackluster. For my personal prediction, I believe that the federal reserve will maintain their current policy and interest rates will remain at the 7%. It's going to be a while before interest rates start dropping below 6% and if they drop below that, the demand for homes will overwhelmingly surpass the supply. Lastly, I believe it will be another 4-5 years before the housing regains equilibrium.

Questions:

• Do you think that the Fed will raise interest rates, lower them, or keep them the same for 2024?
• When do you think that the housing market will begin to stabilize?
• Do you think that there will be a housing bubble in the near future, why or why not?